GrainCorp and AWB this morning announced plans to merge in a deal that would create one of Australia’s largest diversified agribusinesses.

The new entity will trade as GrainCorp Ltd and have a combined market capitalisation of about $2 billion, ranking it as one of the biggest rural focused businesses on the ASX 100.

The new company will be a major heavyweight in grain marketing and handling and a significant grain exporter likely to ship as much as five million tonnes a year.

It will also incorporate Landmark and be the world’s fourth largest commercial malt producer and a leading Australian flour miller – the latter courtesy of its stake in Allied Mills.

Notably the merger move will see AWB abandon plans to sell a stake in its Australian commodities business to US-based Gavilon.

Speculation has been mounting in recent weeks that negotiations over the Gavilon deal (which was originally to have been finalised by the start of July) had stalled.

However, as recently as two weeks ago an AWB spokesman told FarmOnline the deal remained on track with an official announcement likely by month’s end.

But that announcement it now seems has confirmed a much different plan – one that will unite two of the grain industry’s traditional rivals.

GrainCorp chairman, Don Taylor, said the merged company would have the scale to match the large global grain companies now competing domestically and exporting grain from Australia.

It would also place the merged entity in a strong position to take advantage of the growing food demand from Asia, the Middle East and North Africa.

AWB chairman, Peter Polson, said the deal would deliver synergies in excess of $40 million a year and hinted at savings to be made from merging the two head offices.

Mr Polson will take the reins as chairman of the new company, to be headquartered in Sydney, with Mr Taylor as his deputy.