Select Harvests shares accelerated their recovery from a four-year low as the almonds group revealed a takeover bid from a Middle Eastern sovereign wealth fund – although the offer had been rejected.
Shares in Select Harvests, which two weeks ago touched their lowest since 2013 amid continued disappointment at a weather damaged crop, closed up 25% in Sydney at Aus$5.27.
The jump followed the group's announcement - as it unveiled a Aus$45m cash raise, from the issue of some 10.7m new shares sold at Aus$4.20 apiece – that it had received an approach from Mubadala Investment Company, the United Arab Emirates sovereign wealth fund, which claims a portfolio valued at $126.7bn.
Mubadala had, in an "indicative proposal", offered Aus$5.85 per share for Select Harvests, valuing equity in the almonds grower and trader at Aus$430.6m.
However, Select Harvests said that it had rejected the offer from Mubadala – whose current investments range from semiconductors to oil to space travel group Virgin Galactic - and declined a request for due diligence.
The proposed deal "significantly undervalued" Select Harvests, the group said, and was also insufficient to warrant the exclusivity over talks demanded by Mubadala, the almonds group said in a statement.
Select Harvests also flagged "potential risks" in the deal gaining regulatory approval, including from Australia's Foreign Investment Review Board, which oversees foreign investment in the county, and has shown its willingness to reject proposals from foreign suitors in sectors including agriculture.
Two years ago, for instance, its advice prompted the rejection of an initial China-backed plan to by the huge Kidman estates, on a finding of "contrary to the national interest".
Select Harvests said that such factors had "persuaded the board not to engage in the [Mubadala] indicative proposal at its headline value", with the bid rejected on September 25.
"It is possible that Mubadala may revise its indicative proposal," the group said, although adding that it had yet to receive a fresh offer.
Mubadala, which aims to accelerate Abu Dhabi's economic growth "through diverse investments worldwide", has up to now had little direct exposure to agriculture, despite a diverse portfolio of investments in companies ranging from the US-based Viceroy hotels groups to Spanish solar energy group Torresol.
In Australia, it already has investments in energy businesses OMV and Oil Search.
Select Harvests revealed the approach as it unveiled that it had "successfully completed" its fund raise, which managing director Paul Thompson said was designed to "strength the company's balance sheet and provide the financial strength and flexibility to pursue our strategy of optimising investments".
The group said it retained "strong" fundamentals, backed by a growing world almond market, and despite the weather setbacks investors to its harvest prospects.
By Mike Verdin