GrainCorp set for ADM bid

26 Apr, 2013 08:05 AM
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12
 

AUSTRALIA'S biggest agribusiness, GrainCorp is poised to accept a third takeover bid - worth more than $3 billion - from its biggest shareholder, the commodity giant Archer Daniels Midland (ADM).

GrainCorp's board of directors has given the US suitor the green light to make an off-market takeover offer next week to acquire all the outstanding 80.1 per cent shares in the big eastern States grain business, subject to the satisfactory completion of limited confirmatory due diligence.

If successful, the deal would pay shareholders $12.20 a share, plus a dividend totalling $1/share.

If regulatory approvals are not achieved by October 1 an additional fully franked dividend of 3.5 cents per share will be paid each following month until regulatory conditions have been satisfied or waived, assuming GrainCorp is performing profitably over that relevant period.

US-based ADM's last offer made in November was for $12.20, and prior to that $11.75.

Directors this morning indicated they will recommend the ADM offer subject to no superior proposal appearing and the preparation of an independent expert determining that the ADM's proposal is fair and reasonable.

GrainCorp also wants regulatory conditions to be satisfied or waived before December 31 or the deal will be off.

The company has already permitted ADM to undertake a limited scope of confirmatory due diligence starting yesterday, until May 2.

ADM will make its takeover offer, subject to satisfactory completion of this due diligence, on or before 2 May.

The $13.20 payable to shareholders compares with Wednesday's GrainCorp share price of $11.87.

Agribusiness analyst with RBS Morgans Belinda Moore said ADM's revised offer was an attractive outcome for GrainCorp shareholders.

Based on her 2013 and 2014 financial year forecasts, the revised offer of equates to an earnings before interest tax depreciation and amortisation (EBITDA) multiple of 9.1 times and 9.8 times respectively.

However, if successfully completed, the total payments shareholders would have received from the time of ADM's first approach last October were equivalent to $13.55/share plus up to an additional 58 cents/share for those shareholders who captured the full benefit from franking on the dividends (equals $14.13).

After rebuffing the two previous offers from the Illinois-based multinational, GrainCorp chairman, Don Taylor, said his board believed the latest ADM offer highlighted the strategic value of the company's unique assets.

If successfully completed, ADM's total payments to GrainCorp shareholders since last October's first approach would be 15pc higher than ADM's initial offer.

Mr Taylor said ADM's persistence in its takeover plans for GrainCorp emphasised the company's enviable proximity to the fast growing Asian markets.

"GrainCorp will work with ADM to ensure that ADM's confirmatory due diligence requirements can be satisfied, following which a takeover offer would be made on the terms agreed," he said.

GrainCorp operates one of the world's largest grain storage, handling and logistics network based on seven ports and more than 270 grain receival sites in Queensland, NSW, Victoria and South Australia.

It also runs grain marketing operations in Australia and Europe and owns the world's fourth biggest barley malting operation, with 18 plants in North America, Europe and Australia.

It also has a 60pc stake in Australia's biggest flour business, Allied Mills.

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READER COMMENTS

Ben
26/04/2013 10:01:06 AM

I think you will find that the offer is $12.20 per share, plus $1 fully franked dividend, plus $0.43 in franking credits (if you can utilise them).
Rusty
26/04/2013 5:15:59 PM

We are headed back to the 1940's when American grain traders broke many Australian wheat growers.
Andres
27/04/2013 1:12:27 AM

In each time agribusiness monopolies are forged more, hopefully this new acquisition allows hold down prices and quality at least. www.salmontemar.com/productos/sal -de-consumo-animal
JED
27/04/2013 6:34:44 AM

We have become the 51st state of the USA without all the subsidies and Government support the US Grain growers get. We were barely surviving prior to deregulation now 100% of the profit will go overseas and our essential infructstructure namely the Ports will be owned and totally controled by foreign interest. A choke hold on our exports. This is not the Australia I was born into. And this announcment came a day after ANZAC day. Shame on all the Graincorp Directors I hope you enjoy your retirement package you will receive including the so called grower Directors Mr Mangeldorf and Taylor.
Bern
27/04/2013 9:29:55 AM

I dont care if the trading arm of Graincorp goes overseas, but it should be law that the port assets are australian owned. Just too big a risk otherwise. Farmers must be mad to allow this to happen. Rise up for this or else never complain again.
torobrook
27/04/2013 12:49:24 PM

Lets trot out the old myths and conspiracies. Rusty, you are so absorbed by your prejudice you have got your facts wrong. Wasn't it the 1930s. Aust. wheat growers were not broken by American traders. The world was awash with wheat and oh the price goes down - as has been going on for time immemorial. The NSW grain farmer who retains his Graincorp shares today would have a skip in his step. Pity about the WA grain farmer who languishes with his one $2 share which can only be realised when he leaves farming.
ecnerwal
27/04/2013 10:13:10 PM

The real problem started way back when the Grain Bulk Handling Authority was a State Government owned instrumentality. Growers paid for it via their regulated fees but never got ownership even though they paid for it over and over! If it had been set up like in WA as Grain Grower owned Co-op it had a much better chance of remaining in Australian Ownership just as CBH is today. CBH is still the best set of facilities in Australia.
fred
27/04/2013 11:00:14 PM

And some in WA want to privatise CBH. Have a look you promoters of a corporatised CBH. This is what will happen in WA if you get your way.
cannona
28/04/2013 6:14:11 AM

Bern, Farmers can do nothing about this as it is a shareholder driven company. Deregulation has been a net negative for anyone producing food commodities. I don't know where to from here for producers.
Youngy
28/04/2013 6:25:27 PM

What a weak sellout. Shame Graincorp directors haven't got the guts of their grower shareholders.
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