Australia’s GrainCorp shares surge on takeover bid

October 22, 2012
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GrainCorp has one of the largest grain storage, handling and logistics networks in Australia/AFP
SYDNEY, Oct 22 – Australian agribusiness GrainCorp’s share price spiked Monday after the company received a Aus$2.68 billion (US$2.76 billion) all-cash takeover offer from US food giant Archer Daniels Midland (ADM).

GrainCorp said its board was considering the indicative, non-binding bid from the leading agricultural commodities trader, which is prepared to pay Aus$11.75 for each GrainCorp share.

Shares in the company were at Aus$8.85 before being placed in a trading halt on Friday and soared as high as Aus$12.69 before closing 39 percent higher at Aus$12.30 Monday, fuelling talk of counter offers.

“The GrainCorp board is reviewing the proposal and has not yet formed a view on its merits and will keep the market informed of any material developments,” GrainCorp said in a statement.

It confirmed that ADM last week increased its stake in the Australian business to 14.9 percent following the purchase of a significant block of GrainCorp shares, equivalent to 10 percent of the company, on Friday.

Morningstar analyst Peter Rae said investors appeared to believe that GrainCorp was worth more.

“The market is expecting that there will probably be a higher offer. The offer from ADM is only indicative at this stage,” he said.

In a client note, Deutsche Bank analyst Mark Wilson said ADM’s move comes amid a period of rapid industry consolidation and other bids could emerge.

“Given the strategic value of the assets, and this is the last remaining Australian grain company in public ownership, we believe there could be other interested parties such as global grain companies or an Asian buyer,” he said.

According to Dow Jones Newswires, JP Morgan named global grain traders including Cargill and Louis Dreyfus, Asian companies Noble Group and Olam and China’s China Foods and Bright Food as possible counter bidders.

GrainCorp services about 30,000 grain producers in the eastern states of Queensland, New South Wales and Victoria and South Australia and has one of the largest grain storage, handling and logistics networks in the nation.

Its combined storage capacity is more than 21 million tonnes at about 280 country sites, seven bulk port elevators and two speciality terminals. Its network is aligned with rail and road links for transporting grain to market.

The Illinois-headquarted ADM is one of the world’s biggest food companies, producing goods from cottonseed and peanuts to ethanol and animal feed, while it is also a large manufacturer of biodiesel and ethanol.

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