GrainCorp says sweetened bid still not enough
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In response, ADM left open the prospect of selling down or out of its near 20 per cent stake in the Sydney-based grain handler.
Shares in GrainCorp closed 0.65 per cent lower at $12.30 on Thursday, but remain 63 per cent higher this year after soaring on news of ADM's original offer.
GrainCorp told shareholders that while it would be "constructive in any dealings in relation to proposals that have the potential to be in the best interests of shareholders", ADM's improved offer had "not changed the board's view that ADM's proposal materially undervalues GrainCorp".
ADM's offer is $12.20 a share, 45¢ higher than its first offer of $11.75 a share made in October.
This is well short of the $13 a share believed to be sought by GrainCorp, although there are questions about whether conditions underpinning GrainCorp's recent record earnings will continue in 2013.
Brisbane-based RBS Morgans analyst Belinda Moore said the board's rejection was not a surprise and ADM would likely need to "increase its bid materially to get board support".
Ms Moore reiterated that the bid was priced below the average acquisition multiple for agribusinesses, of 9.5-9.7 times forecast earnings, equating to $13.97 and $14.33 a share. Other analysts, such as Moelis & Co's John Garret, tipped ADM would go hostile.
ADM defended the $2.8 billion price tag - the same as GrainCorp's market capitalisation - and said it intended to consider its options "with respect to GrainCorp and our 19.9 per cent shareholding".
"The revised proposed represented a substantial premium to the prevailing GrainCorp share price at the time of our first approach," it said on Thursday.
The Australian Bureau of Agricultural and Resource Economics and Sciences recently lowered its 2012-13 crop estimate by 2.2 per cent to 22 million tonnes due to dry weather - well down on last year's record 29.9 million tonnes.
The downgrade will put more upwards pressure on grain prices after US crop failures.
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