Sweetened $3b offer wins GrainCorp
The offer, in which shareholders would receive $12.20 a share, plus a $1 dividend, is the latest in a series of sweetened bids by ADM since it first approached the company in October last year.
The move, if successful, would give ADM control over GrainCorp's valuable grain exporting assets, in particular, seven of the eight ports that ship grain in bulk from Australia's east coast. The company, which started life as the New South Wales government's Grain Elevators Board in 1916, would turn into a branch of a multibillion-dollar global commodity house, with its headquarters in Illinois.
Ms Watkins said the company's focus had "very much been on shareholders", and getting a good outcome for them.
"I'm sure there will be a number of different stakeholder groups out there who will have a range of reactions," she said on the value to grain growers.
She said it was likely to be "business as usual" for the company if the takeover went ahead, but admitted she had had little direct contact with ADM.
"We certainly haven't discussed their intentions," she added. But Jon Slee, chairman of the Grain Industry Association of Western Australia, said local growers would be concerned about the future of GrainCorp's smaller divisions.
"There's a risk that they shut down smaller local processing arms as they shift away from Australian processing and become more focused on large-volume commodity trading," he said.
He said growers would like to see ADM invest in storage and handling infrastructure, as well as processing plants, in Australia.
"That's where ADM have got expertise," he said. "We'd like to see them bring that to the table."
About half Australia's wheat production comes from the west.
The announcement of the takeover offer resulted in GrainCorp's share price jumping 7.9 per cent to $12.81, the highest since the company listed on the stock exchange in 1998. ADM chief executive Patricia Woertz said in a statement that the group, which converts corn, wheat and other crops into food, feed, fuel and industrial products, was pleased to have reached agreement with GrainCorp "to conduct due diligence" and, subject to that due diligence, put a recommended offer in front of the GrainCorp shareholders.
Analysts said the most valuable asset to ADM was control of Australia's main grain-handling ports, which would allow the company to export to Asia, and particularly the Middle East.
"They've got 15 per cent shareholding in Wilmar, a commodities group, and some heavy assets in Asia," PhillipCapital analyst Paul Jensz said.
"So what Australia does is add some premium grain and barley and canola abilities."
GrainCorp's chairman, Don Taylor, said moving that towards a global, price-driven market could be a boon for growers.
"ADM is a big company and offers potential access to the global networks that complement our own," he said.
"Their $3 billion-plus investment will be a real vote of confidence for Australian growers and Australian agriculture."
He said the conditions of the takeover were favourable for the business to run as usual.
"I have absolute confidence that growers will see enhanced service in the immediate future," he said.
ADM bought a 19.85 per cent stake in GrainCorp last year.
Frequently Asked Questions about this Article…
ADM has put forward a sweetened takeover proposal valued at about $3 billion under which GrainCorp shareholders would receive $12.20 a share plus a $1 dividend. ADM previously bought a 19.85% stake in GrainCorp and has been making offers since it first approached the company in October.
GrainCorp's chief executive Alison Watkins said the board's focus was very much on shareholders and getting a good outcome for them, which was a key reason the company accepted the offer. The deal reflects management prioritising shareholder value.
If successful, ADM would gain control of GrainCorp's valuable grain-exporting assets, including seven of the eight bulk grain ports on Australia's east coast — facilities analysts say are the most valuable part of the business for accessing export markets.
Reactions among growers are mixed. GrainCorp officials said it could be business as usual and that ADM's global networks could benefit growers. But local industry representatives warned ADM might shift focus to large-volume commodity trading and could scale back smaller local processing arms unless it invests in Australian storage, handling and processing plants.
Following the announcement, GrainCorp's share price jumped 7.9% to $12.81 — the highest level since the company listed on the stock exchange in 1998.
ADM has said it has reached agreement with GrainCorp to conduct due diligence. Subject to that due diligence, ADM intends to put a recommended offer to GrainCorp shareholders, according to ADM chief executive Patricia Woertz.
Analysts highlight GrainCorp's control of major grain-handling ports that would allow ADM to export to Asia and the Middle East. They also note that Australian operations add premium grain, barley and canola capabilities that complement ADM's Asia assets and partnerships such as its stake in Wilmar.
GrainCorp chairman Don Taylor said ADM's global networks and the company's $3 billion-plus investment could be a vote of confidence for Australian growers. He suggested moving toward a global, price-driven market and ADM's scale could deliver enhanced service for growers in the near term.
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