BREAKFAST DEALS: Wooing GrainCorp

Will Archer Daniels Midland's upped offer seduce Graincorp? Meanwhile, Sundance suffers another setback.

GrainCorp suitor Archer Daniels Midland has sweetened its offer and tweaked some details to bring Alison Watkins to the table, but will it be enough? Sundance Resources is back in a trading halt as yet more problems emerge with the Hanlong Mining deal, just when it was looking good too. Meanwhile, Woodside Petroleum is chancing its arm in Israel, News Corp has revealed some crucial appointments for its separation and another possible consequence of talks between Delta Air Lines and Singapore Airlines over Virgin Atlantic has emerged.

GrainCorp, Archer Daniels Midland

US agribusiness giant Archer Daniels Midland has increased its conditional offer for GrainCorp and boosted its stake in the highly valued target.

ADM is now offering $2.8 billion for the east coast grains handler, or $12.20 a share, which is 3.8 per cent higher than the previous $11.75 offer that GrainCorp rejected as materially undervaluing the company. The suitor says the offer is actually 80 cents higher than its initial proposal, if you include the recently announced 35 cents special dividend. That’s a stretch.

However, the American suitor has also taken an extra 5 per cent of the GrainCorp register, taking its total stake to 19.9 per cent, which it says was approved by the Australian Foreign Investment Review Board.

"Our proposal also offers more certainty, greater value and immediate realisation of potential future value for GrainCorp shareholders than GrainCorp’s stand-alone plan,” ADM’s chief executive Patricia Woertz said overnight, as her company amped up the pressure on GrainCorp boss Alison Watkins.

"ADM is a disciplined buyer, and any combination with GrainCorp must meet our key financial hurdles, taking into consideration the impact of the Australian agricultural cycle on GrainCorp’s earnings power.”

The news is a win for speculators who were betting ADM would come back with a sweetener. GrainCorp shares closed yesterday’s session at $11.94, a 1.6 per cent premium to the previous offer that was rejected on November 15.

But the word is that GrainCorp wants upwards of $13 a share, which effectively means a minimum premium of 50 per cent to the price the stock was trading at before ADM came along. There have been a number of reports hinting that some big potential rivals in Asia are keeping an eye on proceedings, which probably means that latest offer simply isn’t sweet enough to bully GrainCorp into submission.

One outstanding issue that could sway the encounter is the matter of exclusivity. There doesn't appear to be any reference in the conditions of the deal to the "exclusivity" that GrainCorp had a problem with on November 15. A US spokesperson for ADM declined to comment on that aspect of the GrainCorp statement from almost three weeks ago.

This is a crucial issue given the interest for GrainCorp elsewhere in the market. If Watkins had the flexibility to open up a data room to all and sundry it would undoubtedly draw out a not-so-small posse of rival players. In that situation though, it becomes difficult to turn a proposal down.

The American suitor says it is ready to commence due diligence "immediately and expeditiously”. But the $2.8 billion offer is still subject to a number of conditions, including the unqualified tick of approval from both boards, the Australian Competition and Consumer Commission and FIRB.

Watkins looked to have the full support of the register behind her when GrainCorp rejected the $2.7 billion offer. Everyone’s aware of the company’s strategic significance that makes it such a compelling takeover target.

But the market also appears to like the way GrainCorp’s management are running the company. This means that Woertz’s argument that ADM’s bid allows shareholders the "immediate realisation of potential future value,” doesn’t carry the weight the suitor might like. Investors think GrainCorp is going on to bigger and better things in a hurry, with or without ADM.

Credit Suisse and Greenhill Caliburn are advising GrainCorp, while Citigroup and Barclays Capital are helping ADM.

Sundance Resources, China Sichuan Hanlong Mining

To say that China Sichuan Hanlong Mining has thoroughly tested the patience of suitor Sundance Resources would be a profound understatement.

Late last week, Sundance chairman George Jones was musing about how he once believed a deal could be done by last Christmas, let alone this Christmas.

Finally, the Africa-focused iron ore hopeful appeared to be gaining in confidence that a deal could be done, delivering the $4.7 billion Mbalam iron ore port and rail project, which straddles the Republic of Congo and Cameroon, to the Chinese.

But yesterday, Sundance was back in an all-too-familiar trading halt after receiving a letter on December 1 indicating that Hanlong’s proposed lender, China Development Bank, now requires a review of the convention just signed with the Cameroon government and the anticipated permit from Congo.

The "term sheet” from CDB is due December 13 under the scheme of arrangement for the $1.4 billion deal and Hanlong has now indicated that it won’t make that deadline thanks to this new demand from its lender. Sundance has refused to amend the timeline.

"Sundance is now seeking further particulars from Hanlong as to term sheet delivery and scheme timetable consequences,” the company said in a statement yesterday.

Woodside Petroleum, Leviathan

Woodside Petroleum chief executive Peter Coleman has identified Israel’s Leviathan offshore gas field as the next potential growth are for the company by announcing a $US1.3 billion investment for a 30 per cent stake.

The field is currently overseen by US company Noble Energy, but Woodside’s involvement means the Australian company will operate any plant that’s developed as a result of the field.

Noble currently shares ownership of the field with Israel’s Delek Group and Ratio Oil Exploration.

The Leviathan field is estimated to contain 17 trillion cubic feet of gas, which means Woodside’s buy-in price is relatively cheap. The plan is for Woodside to fork out $US200 million once laws permitting LNG export are active in Israel, a final investment decision payment of $US350 million, along with potential revenue sharing payments and $US50 million in drilling and exploration costs.

The reason for the apparently cheap price tag is the regional risk. No one needs reminding that the Middle East is a dangerous place and Israel is not just particularly vulnerable, but an absolute novice when it comes to owning energy assets.

News Corporation, Fox Group

Rupert Murdoch’s News Corporation announced some key appointments brought about by the media company’s planned split of its publishing and entertainment assets.

News Corp, the parent company of this website, is a name that will remain tied to the newspaper assets that Murdoch has built his name on, with the entertainment assets to be housed under the name Fox Group.

As previously indicated, Murdoch remains chairman of News Corp overall, as well as chairman and chief executive of Fox Group, where most of the profits are.

Chase Carey will serve as chief operating officer of Fox Group, while Murdoch’s son James – arguably still a chance of succeeding the octogenarian – will serve as deputy COO.

Current Dow Jones editor in chief and The Wall Street Journal managing editor Robert Thomson will become chief executive of the publishing arm, as reported yesterday.

The news coincides with the resignation of News Corp’s British newspaper boss Tom Mockridge, who will leave the company at the end of the year. Mockridge’s departure caught many onlookers be surprise.

There was also the announcement that News’s iPad publication The Daily, once hoped to be a saviour of sorts for newspaper publishers, would be shut down.

Unlike Mockridge, the departure of The Daily is not a surprise.

As former Technology Spectator editor Charis Palmer wrote on May 11, 2011, its potential to save existing newspaper structures was not backed up by particularly compelling research.

Wrapping up

This morning, Fairfax’s Elizabeth Knight makes the argument that speculation that US giant Delta Air Lines might take a stake in Virgin Australia if it gets a 49 per cent stake in Virgin Atlantic from Singapore Airlines was "probably misplaced.” The business writer makes a good case.

"Delta is trying to snatch Singapore Airlines' 49 per cent of Virgin Atlantic but like most US airlines it is more interested in the trans-Atlantic routes than getting too involved in Australia where it operates a limited service,” writes Knight.

Indeed, Singapore might take the cash and pump more money into Virgin Australia itself.

Meanwhile, a group led by Macquarie Group has might have pulled the pin on a bid for the French gas network of energy giant Total.

Bloomberg says a person familiar with the matter understands that the gas storage business simply didn’t meet Macquarie’s investment criteria.

And finally, Singapore’s Civmec is understood to be in talks to purchase Australian mining services operator Allmine Group, The Australian reports.