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ADM strengthens grip on GrainCorp and sweetens bid

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Archer Daniels Midland sweetened its offer for GrainCorp in an effort to gain board approval from the Australian grain handler for a takeover, adding that it had raised its holding the group to nearly 20%.

US-based ADM, one of the big-four agricultural commodities traders, with Bunge, Cargill and Louis Dreyfus, lifted its all-cash offer for GrainCorp, unveiled in October, by Aus$0.45 a share to Aus$12.20.

The uplift values GrainCorp's equity at Aus$2.76bn ($2.9bn), adding some Aus$100m to the initial offer, and with ADM also guaranteeing to honour the Australian group's commitment last month to a full-year dividend of Aus$0.35 a share, which included a Aus$0.15-a-share special payout.

The offer's value of Aus$12.20 a share represents the price at which ADM revealed it had bought a further 5% stake in GrainCorp on Monday, taking its interest to 19.9%, and making it by far the biggest shareholder.

'Greater value'

ADM's revised offer "reflects the value of GrainCorp's business", including the prospects for profit growth the grain handler outlined last month when unveiling a 19.2% rise in annual earnings, Patricia Woertz, the ADM chairman and chief executive, said.

"Our proposal also offers more certainty, greater value and immediate realisation of potential future value for GrainCorp shareholders than GrainCorp's stand-alone plan."

GrainCorp outlined proposals to add an extra $110m to its annual ebitda by 2016, and outlined the group's "ideal" positioning to exploit Australia's increasing agricultural exports, notably to Asia, including a forecast 20% rise in the next decade.

However, ADM also flagged Australia's record of volatile crop production, vulnerable to drought, saying that its sums were been done "taking into consideration the impact of the Australian agricultural cycle on GrainCorp's earnings power".

"ADM is a disciplined buyer, and any combination with GrainCorp must meet our key financial hurdles," Ms Woertz said.

Board agreement sought

ADM added that it had sweetened its offer "with the aim of arriving at an agreement with GrainCorp's board" to recommend the bid.

The board last month rejected the initial offer, saying it "materially undervalues" GrainCorp.

ADM also said that it was ready "immediately and expeditiously" to start due diligence on GrainCorp.

The statement came after the close of trading in Sydney, where GrainCorp shares closed up 0.3% at Aus$11.94.

ADM shares closed 0.3% higher at $26.79 in New York.


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