Higher offer for GrainCorp unlikely, says Grant Samuel
US agribusiness ADM has made the offer for GrainCorp, which independent expert Grant Samuel estimates to be worth as much as $13.97 a share.
ADM is to pay $12.20 in cash with the balance paid in dividends.
GrainCorp shares closed up 3¢ at $12.50 on Monday in a weaker sharemarket.
Despite recommending shareholders accept the ADM takeover, Grant Samuel said a higher offer could emerge for the company
"It is conceivable that a third party could make a higher offer for GrainCorp: GrainCorp has a number of important strategic attractions for international grain companies, including its unreplicable asset base and ownership of seven out of the eight major grain export terminals in eastern Australia; there is no structural or absolute impediment to an alternative acquirer," the adviser said. "While there is a 'no-shop' agreement, GrainCorp can respond to unsolicited proposals from other parties."
ADM holds a 19.85 per cent shareholding in GrainCorp which could deter other suitors, although "it would not stop a determined bidder" launching a counter offer.
"Potential bidders may have been waiting: to see ADM Australia's full offer price; and/or to see the baseline price at which GrainCorp directors would recommend an offer; and there remains plenty of time for an alternative bidder to come forward," Grant Samuel said.
Even so, it said the prospect of a rival bidder emerging was unlikely, as ADM had announced its intention to bid several months ago and there has been no response from other possible bidders.
GrainCorp handles around three-quarters of the east coast's grain harvest, as well as owning the export terminals, providing any acquirer with an "end-to-end" network, the Grant Samuel report said.
Directors have recommended shareholders accept the ADM offer in the absence of a higher bid.
Frequently Asked Questions about this Article…
ADM has tabled a $13.20 per share offer for GrainCorp. The bid is structured as $12.20 in cash with the remainder of the $13.20 total to be paid in dividends.
Yes — independent adviser Grant Samuel said GrainCorp shares could be worth more than the $13.20 offer because of the scarcity value of its assets. Grant Samuel estimated a potential value as high as $13.97 per share.
Yes. Grant Samuel recommended shareholders accept the ADM takeover in the absence of a higher bid, while also noting it is conceivable a third party could make a higher offer.
Grant Samuel said a rival bid is conceivable because GrainCorp has attractive, hard-to-replicate assets, but on balance it considered the emergence of a rival bidder unlikely since ADM announced its intent months ago and no other suitors have responded.
ADM holds a 19.85% stake in GrainCorp. That significant shareholding could deter some potential suitors, although Grant Samuel noted it would not stop a determined bidder from launching a counter-offer.
GrainCorp owns an ‘end-to-end’ network that handles around three-quarters of the east coast grain harvest and controls seven of the eight major grain export terminals in eastern Australia — characteristics Grant Samuel described as unreplicable and strategically attractive to international grain companies.
GrainCorp’s directors recommended that shareholders accept the ADM offer in the absence of a higher bid.
On the Monday referenced in the report, GrainCorp shares closed up three cents at $12.50, despite a weaker overall sharemarket.
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