Sweetened $3b offer wins over GrainCorp
The offer, which will mean shareholders receive $12.20 per 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, will 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, and turn the company - which started life as the NSW government's Grain Elevators Board in 1916 - 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 to a good outcome for shareholders".
She said it was likely to be "business as usual" for the company if the takeover goes 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.
About half of 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 - its highest since the company listed on the stock exchange in 1998.
ADM's 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 before GrainCorp's 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 but 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 chairman Don Taylor said moving 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 if anything else in the immediate future."
ADM bought a 19.85 per cent stake in GrainCorp last year.
Frequently Asked Questions about this Article…
Archer Daniels Midland (ADM) has tabled a roughly $3 billion takeover bid for GrainCorp that would see shareholders receive $12.20 per share plus a $1 dividend. ADM first approached GrainCorp in October last year and already bought a 19.85% stake, and the company says it will conduct due diligence before putting a recommended offer to GrainCorp shareholders.
GrainCorp’s CEO Alison Watkins said the board’s focus was ‘very much’ on shareholders and getting a good outcome for them, which is why the sweetened bid was accepted. The board judged the terms attractive for shareholders and moved to engage with ADM as a result.
Analysts highlighted control of GrainCorp’s grain-exporting assets — particularly seven of the eight bulk grain ports on Australia’s east coast — as the key prize. Gaining those port and handling capabilities would help ADM export grain to Asia and the Middle East.
The takeover announcement pushed GrainCorp’s share price up 7.9% to $12.81, its highest level since the company listed on the stock exchange in 1998.
GrainCorp’s leadership says it is likely to be ‘business as usual’ if the takeover goes ahead, and the chairman Don Taylor suggested ADM’s global networks could benefit growers. However, industry voices such as Jon Slee of the Grain Industry Association of WA warned there’s a risk ADM could shift away from smaller local processing arms toward large-volume commodity trading.
Growers and industry representatives have said they are concerned smaller local processing divisions might be shut down as the new owner focuses on large-volume trading. They’d like to see ADM invest in storage, handling infrastructure and processing plants in Australia to support local growers.
ADM’s CEO Patricia Woertz said the group reached agreement with GrainCorp to conduct due diligence and, subject to that work, would put a recommended offer before GrainCorp shareholders. For investors, that means the deal is not final — due diligence is the standard review period to confirm assets, liabilities and terms before a formal, recommended bid is made.
Yes. Analysts noted ADM already has regional ties — for example a 15% shareholding in commodities group Wilmar and substantial assets in Asia — and that acquiring GrainCorp would add premium Australian grain, barley and canola capabilities to ADM’s global trading and processing network.
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