Breakfast Deals: ADM's long harvest

Archer Daniels Midland may ease off its GrainCorp bid until after the federal election, while Steadfast’s cracker of a float augurs well for the IPO market.

With the federal election up and running, Archer Daniels Midland would be well advised to ease off on GrainCorp approvals until after September 7. Let’s just hope there isn’t another hung parliament. Meanwhile, Steadfast Group has provided a great boost for the local IPO industry, Hastings Funds Management has picked up some gas in Northern Ireland and Dexus Property Management could, well, hit the gas with its Commonwealth Property Office Fund play.

GrainCorp, Archer Daniels Midland

With both political parties preparing to throw everything at each other, including the kitchen sink, Archer Daniels Midland looks like it could pause its takeover offer for GrainCorp for the moment.

That’s not to say that the $3 billion-plus deal is going to be called off. It’s just that the US grain giant will wait until Labor and the Coalition have slugged it out before pushing to secure approval from the Foreign Investment Review Board

If they try to jostle for approval now, they might cop a stray kitchen sink the face.

It’s undeniable that GrainCorp and ADM are in a bad spot. Nothing’s official yet obviously, except the election date – September 7.

GrainCorp’s standstill agreement with ADM that prevents the US giant from selling its 19.9 per cent stake (an unusual arrangement, normally standstill agreements prevent suitors from buying) expires on December 31.

Plenty of time, you would think.

Labor has given some not-so-subtle hints that it favours foreign investment enough to waive the ADM offer through, but anything can happen in an election campaign.

The Coalition is continuing to come under fire from the farming lobby, via The Nationals, as growers get nervous about the prospect of a monopoly infrastructure owner on the east coast falling into foreign hands.

It’s unlikely that Labor will win the election. Punters are generally good forecasters and a Labor victory is paying $4 at the moment. Those are some long odds.

If the Coalition wins it would only take about a week for an Abbott cabinet to be sworn in and work on the ADM offer could recommence. That would take us to mid-September.

But a hung parliament, which is conceivable given the closeness of the polls, would be a disaster for GrainCorp and ADM.

It took two weeks for former prime minister Julia Gillard to negotiate with the independents to form a minority government. Replicate that scenario now and, including the swearing in period, we’re getting closer to October.

And it’s in the aftermath of a hung parliament where anything can happen. If another election were called to secure a clear winner, then all bets are off.

With all this in mind, ADM would indeed be wise to pause its bid for GrainCorp for the moment. Though it is amusing to remember that the December 31 deadline was originally thought as important because Chinese regulatory approval would be difficult to secure, not FIRB.

Steadfast Group

It turns out that the caution of insurance broker Steadfast Group before its $334 million float on Friday was prudent, but ultimately unnecessary.

Steadfast erred on the side of caution and got JPMorgan and Macquarie Capital to pencil in the cut-off at $1.15, rather than $1.20 a share, to make sure the first day’s trading was a positive one.

Well, it was a positive’s day of trading, that’s for sure. Steadfast finished the session 23.5 per cent higher at $1.42. Investors were all over this one.

The top 20 shareholder list on Friday showed that AMP Capital, BT Investment Management, Perpetual, Schroders, Colonial First State, Vinva and Renaissance have jumped on board. However, given the enormous turnover on the first day of trading, that isn’t written in stone.

All this is nothing but good news for companies looking at a float of their own. The big fish is Nine Entertainment.

Hastings Funds Management, Terra Firma, Phoenix Natural Gas

The Westpac-backed Hastings Funds Management has picked up a natural gas business in the home of the world’s greatest accents, Northern Ireland, for £700 million ($1.2 billion).

Hastings’s Utilities Trust of Australia has acquired Phoenix Natural Gas from Terra Firma, which has owned the business since 2005.

Phoenix has been on the chopping block since March when Terra Firma tapped JPMorgan to flog the business.

Hastings has purchased the business for its own funds and those it manages on behalf of Royal Bank of Scotland.

Dexus Property Management, Commonwealth Property Office Fund

Apparently, Commonwealth Bank of Australia’s federal court action against Dexus Property Management could spur them into a full takeover bid for Commonwealth Property Office Fund sooner rather than later.

CBA and Dexus are of course at odds over the ‘forward contract’ Dexus has with Deustche Bank that, it claims, means it can speak for 14.9 per cent of the register.

The Australian Financial Review reports that “senior sources” believe the legal tensions will quicken Dexus. The newspaper doesn’t indicate where those sources are from, but they are talking a bit of sense.

Mirvac Group is also expected to make a run at the fund.

Wrapping up

Australia’s largest listed cattle company, the rather sensibly named Australian Agricultural Company, will confirm to the ASX this morning that it’s considering a capital raising after word leaked out into the press over the weekend.

Speaking of capital raisings, Paladin Energy is tapping investors for $88 million to help alleviate its $US670 million debt load.

Speculation was leaning towards Paladin securing a deal to offload its stake in African uranium mine Langer Heinrich.

Far from it. Paladin has called off the sales process because the beaten down spot uranium price is hurting valuations.

And finally, you might recall that this column called Fortescue Metals Group’s refinancing deal signed last year during the iron ore price slump as being the best of 2013.

Well, according to The Australian, the iron ore miner has been hit with a lawsuit alleging that it was trading while insolvent.

Fortescue denies the charge and will defend itself.

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