Archer Daniels Midland (ADM) has sent the share market into a spin scouting for buyers to take its contentious 19.9 per cent stake in eastern Australia’s grain giant GrainCorp.
GrainCorp’s share price suffered more than a seven per cent slump to $8.10 when trading opened on Wednesday morning, reflecting fresh share market uncertainty about the true value of the stock.
GrainCorp managing director, Mark Palmquist, said he had no knowledge of ADM’s plans or why it was now selling its stake.
“I am in the dark on this,” he said at this week’s Australian Grains Industry Conference in Melbourne, where speculation about the move was rife.
On Tuesday night global grain and food processing giant ADM launched its sale offer, but apparently withdrew from the market after the price offered by banks pitching for the block trade was not attractive enough to the vendor.
Sources said bids came in around $8 a share and none of the offers were for the entire stake.
ADM first paid a premium of $11.75 a share back in late 2012, launching an unsolicited takeover attempt.
A year later its $3.4 billion bid for the former grower-owned bulk handling company was blocked by the federal government after Treasurer Joe Hockey’s consultations with the Foreign Investment Review Board.
The takeover battle had featured intense Senate inquiry scrutiny of Australian grain infrastructure and market ownership during which ADM and GrainCorp staff were grilled.
Fierce opposition to the sale was also voiced by the farm sector.
Many graingrowers feared the industry would be less competitive with such a powerful global player controlling much of its local storage and marketing infrastructure.
This week Chicago-based ADM finally looked for an exit, hiring investment adviser Lazard to run a "blind date" pitching process to sell its shares to investment bankers such as Morgan Stanley and UBS after share trading ended on the Australian Securities Exchange (ASX) on Tuesday.
GrainCorp shares had closed at $8.64, which would have valued ADM’s stake at $392 million.
While US-based ADM reserved the right to pull the sale or reduce the size of the trade, market analysts noted the fact it had Lazard running the process was a clear signal to pitching banks and likely investors it wanted to cut all GrainCorp ties.
GrainCorp is Australia’s biggest listed agribusiness with more than $4b in annual revenues from business interests ranging from local grain storage and logistics activities to international grain trading, oilseed processing, malt and flour production.
If ADM can eventually find buyers for its shares, its exit from GrainCorp’s share register is expected to be bitter-sweet news for the local company.
Until now thoughts about another potential takeover tilt by ADM have helped prop up the share price.
But the US giant’s presence has also been a massive distraction for investors, if not management and the company's board as well.
Should ADM eventually sell, all attention will revert back to GrainCorp's flagging operational performance.
The group reported a 2.5pc slump in first half profit to $20m in May, which was just the latest in a series of poor results as tough weather conditions weighed on grain volumes.
GrainCorp shares have traded to highs of $9 in the past month – well up from their five-year low of $7.47 in March – but still lagging behind the peak of $12.69 hit during ADM’s share buying scramble in May 2013.
Meanwhile, Singapore-based agri-commodity giant, Olam International, has just acquired ADM’s worldwide cocoa business.
Olam Cocoa has become one of the top three global processors of cocoa products, as well as one of the world’s leading buyers of cocoa beans.