AUSTRALIA’S largest listed agribusiness Graincorp has confirmed US crop giant Archer Daniel Midlands has bought just under 10 per cent of the company in an off-market transaction this morning “and wishes to engage in discussions with Graincorp concerning a potential transaction”.
Graincorp suspended trade in its shares after two block trades worth $536 million went through at 7.05 this morning, priced at $11.75 a share, representing a 33 per cent premium to Thursday’s close of $8.85.
Graincorp told the exchange that it had received “no formal proposal” to date but if it did, it would be reviewed by the board along with “other options to maximise value for Graincorp shareholders”.
RBS Morgan’s agribusiness analyst Belinda Morgan this morning said “we always believed that Graincorp would be taken over at some point in the future given the strategic nature of its assets, however corporate activity in the stock has come sooner than expected.
“Given the scale and strategic nature of Graincorp’s assets and the fact that it is the last remaining significant grain company capable of being taken over in Australia, we expect a number of parties could be interested in GNC and a bidding war may emerge.”
Ms Moore said Australian agribusiness takeovers were on average priced at 9 times earnings and applying this multiple to RBS Morgans’ average season forecast for 2013-14, resulted in a takeover price of $12.12 for Graincorp.
“Our forecasts for FY13 and FY14 are in the process of being downgraded as seasonal conditions have deteriorated in recent months,” she wrote in a note to clients.
Australia’s food and agribusiness sector has been subject to a strong of foreign takeovers in recent years. Canada’s Viterra purchased ABB Grain – now part of commodities trader Glencore International – and Agrium snapped up AWB. Wilmar owns 10 per cent of the country’s largest baker, Goodman Fielder.
Bloomberg this morning reported Wilmar International was the buyer of the Graincorp stake. Wilmar and ADM have existing partnerships and yesterday announced they had obtained regulatory approvals for partnerships in global fertiliser and European vegetable oil. The two companies have also launched their partnership in global ocean freight.
GrainCorp, which had a market value of $2 billion at yesterday’s close, operates seven of the eight ports that ship grain in bulk from Australia’s east coast and has a “virtual, natural monopoly” on the eastern seaboard, according to Justin Crosby, a policy director at the Sydney-based NSW Farmers’ Association, which represents 10,000 members, half of them grain growers.
GrainCorp, which traces its roots to 1916 and the Grain Elevators Board of the New South Wales agriculture department, handles as much as 60 per cent of eastern Australia’s grain crop and has about 20 million metric tonnes of storage at more than 280 inland grain handling sites, according to the company.
Its revenue has surged since Australia’s 2006 decision to strip AWB of an export monopoly, after an inquiry found it was among firms that made illegal payments to win contracts from the former Iraq regime of Saddam Hussein under the United Nations’ oil-for-food program.
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