MARKETS SPECTATOR: Game on for GrainCorp

US ag giant Archer Daniels Midland snapped up 10 per cent of GrainCorp overnight. It looks they're trying to flush out rivals ahead of a takeover.

It looks like the predators have pounced on Australia’s last remaining significant grain company available for takeover.
Early this morning 10 per cent of the company’s share been crossed at $11.75, a whopping 33 per cent premium to Graincorp’s last traded price yesterday of $8.85.

Archer Daniels Midland (ADM) are behind the raid and have said they wish to engage in talks with GrainCorp. Hence, GrainCorp’s shares have been placed in a trading halt.

The 33 per cent premium is very interesting indeed. Given the scale and strategic nature of GrainCorp’s assets, it looks like the suitor has tried to flush out other interested parties by shocking the market with the premium on offer. Also, reports that ADM were very interested in Viterra earlier this year, which was eventually acquired by Glencore could also explain their eagerness and willingness to pay such a premium.

Nonetheless, the quality of the assets and the fact that it’s the last significant public grain company available in Australia means that there could still very easily be a bidding war. Given the $11.75 price at which the shares transacted, GrainCorp is almost certain to trade at all-time highs when it resumes trading next Tuesday.

GrainCorp’s share price history since listing.

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