Cargill sues Viterra over alleged deception at Australian malt maker
Cargill, which purchased Joe White from Vittera for A$420m (US$368m) last year, has claimed that it was deceived and was forced to slash production by 60,000 tonnes in the first six months of its control of the firm.
According to a lawsuit it has filed in the Victorian Supreme Court, Cargill says it learned immediately after its purchase that the malt company was not operating to the expected standard and could only meet contractual obligations to clients 60% or less of the time.
Barley malt is a key ingredient in beer, and Joe White supplies the product to a number of Australian brewers, including Lion, SABMiller and Coopers, as well as brewers in east and southeast Asia.
In its lawsuit, Cargill has revealed that during a sales process in July last year, Viterra executives claimed that Joe White made “high quality malt”, hiding the truth that it actually could not produce malt in the quantity and quality required by customers.
According to Cargill, Joe White could produce only 60% of its contracted output, believed to be about 500,000 tonnes a year, to the specifications set by customers, and would now require A$30m (US$26m) to upgrade its plants.
Local media reports added that in October last year, Cargill allegedly approached Viterra after reports from Joe White executives that the company had indulged in malpractices.
This included supplying customers with malt made from the wrong variety of barley, using gibberellic acid as an additive to speed up the malting process, and supplying chemical analysis certificates to customers that “misstated the results of analytical testing on the malt”.
In response, according to the reports, Viterra did admit there were “instances” of the wrong barley being used, but added that there was no “fundamental issue” with Joe White.
Vittera, which was purchased by Swiss commodities group Glencore International for A$6.1bn months before the Joe White sale, has not yet responded to the lawsuit.