Analysts downgrade stock ahead of slump in earnings
GrainCorp chief executive Alison Watkins will leave the company in January to join Coca-Cola Amatil in March. Her announcement caught investors by surprise, although the planned shift had clearly been in the works for some time.
"I had planned to leave the company at the time control passed over to ADM," she said in a statement.
"Given last week's unexpected developments, I feel it is in the best interests of GrainCorp that I move on now and allow the board to find new leadership."
GrainCorp chairman Don Taylor will act as executive chairman from mid-January, pending the appointment of a new chief executive.
Mr Taylor is a former executive chairman at Grainco Australia before its merger with GrainCorp.
On Friday, the government blocked a takeover of GrainCorp by US company Archer Daniels Midland, although the Treasurer did open the door for ADM to raise its stake in the company from 19.86 to 25 per cent.
On Monday ADM withdrew its offer, opening the door for it to raise its stake at a lower price than offered to shareholders under the terms of its offer.
No discussion has taken place on either the appointment of ADM representatives to the GrainCorp board or of it raising its stake in the company.
An ADM spokesman said the company would review all options.
GrainCorp was hit by "sell" and "underperform" recommendations from some analysts when the shares dropped from ADM's $13.20 offer to $8.41 on Monday.
Broker BellPotter placed a "sell" recommendation on the stock, highlighting the looming decline in core grains handling earnings amid the prolonged dry weather in Queensland and northern NSW.
"While GNC has shed 20 per cent of its value it continues to trade at a relatively high PE of 14.5 times [full year 2014 estimated] earnings and levels consistent with those just prior to the ADM bid," analyst Jonathan Snape said.
Frequently Asked Questions about this Article…
Analysts are downgrading GrainCorp stock due to the failure to secure government backing for a $3.4 billion takeover bid and an expected slump in earnings caused by dry growing conditions.
The blocked takeover by Archer Daniels Midland led to a drop in GrainCorp's stock price from ADM's $13.20 offer to $8.41, prompting 'sell' and 'underperform' recommendations from analysts.
Don Taylor is the current executive chairman of GrainCorp, stepping in from mid-January until a new chief executive is appointed.
Alison Watkins planned to leave GrainCorp when control passed to ADM. However, due to recent developments, she decided to move on earlier to allow the board to find new leadership.
Archer Daniels Midland plans to review all options after withdrawing its takeover offer. The government has allowed ADM to increase its stake in GrainCorp from 19.86% to 25%.
Prolonged dry weather in Queensland and northern NSW is expected to lead to a decline in GrainCorp's core grains handling earnings, contributing to the stock's downgrade.
The market reacted to ADM's withdrawal by dropping GrainCorp's share price significantly, leading to negative analyst recommendations and concerns over future earnings.
Despite a 20% drop in value, GrainCorp continues to trade at a relatively high price-to-earnings ratio of 14.5 times the estimated full-year 2014 earnings.
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