THE DISTILLERY: Well handled, GrainCorp

Jotters argue GrainCorp's latest results make the best takeover defence, while Qantas' share buyback is given the tick of approval.

GrainCorp is different from the majority of recent high profile takeover targets in recent times in one crucial sense. It’s not in trouble. Far from it, the company is going from strength to strength. Australia’s business commentators offer a lot of support this morning for chief executive Alison Watkins and her strategy to get as much value out of GrainCorp as possible.

The Australian’s Andrew White explains how the quality of the GrainCorp books is the best defence against any takeover.

"As results go, the 2011-12 numbers for GrainCorp make as good a takeover defence as the company is likely to find: a third straight year of earnings growth to deliver a record profit, a bump in the dividend and results from continuing diversification and capital expenditure… Whatever else GrainCorp's advisers (they have two working the defence with Greenhill helping out Credit Suisse) have been able to uncover in terms of rival suitors or valuation arguments, the management strategy continued and accelerated under chief executive Alison Watkins – diversifying by shifting earnings away from the volatile grain handling business – is proving the best defence against an unwanted suitor.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd similarly believes that Watkins has showed how to "squeeze as much as she can out of GrainCorp’s diverse asset base,” and more broadly did "a good job” justifying the rejected offer.

Business Spectator’s Stephen Bartholomeusz points out that the register appears to be fully behind the board.

"The market’s ability to digest the rejection of the ADM approach so easily, moreover, suggests that it not only likes the business model Watkins has developed and the momentum it has been producing but subscribes to her view that GrainCorp is both a highly strategic player within a global agricultural sector with tremendous growth prospects but one with the ability to capture its fair share of that growth. The nature of the ADM approach – an indicative, non-binding, highly conditional proposal – is one that boards can readily reject, particularly from the platform of a strongly-performing company.”

The Australian’s Bryan Frith speculates on what ADM can do now that it has received official word from GrainCorp that $2.7 billion won’t cut it.

"Archer Daniels now has several alternatives. One option is to walk away and take its foot off the strategic stake, by unwinding the equity swaps. Another is to sit and wait to see how things unfold. Another is to try to ascertain what it would take to secure engagement with the GrainCorp board. Or Archer Daniels could simply go straight to the shareholders by launching a hostile bid for GrainCorp. Yesterday's response by Archer Daniels suggests that it is unlikely to walk away, at least at this stage. Had it intended to do so it could have been expected to have said so in its response. Instead, its suggestion that the proposal put to GrainCorp ‘remains attractive’ indicates that Archer Daniels remains interested. But it may not be in a hurry to decide its next step.”

In other company news, Fairfax’s Elizabeth Knight explains how the shareholder buyback at Qantas Airways, however modest, came as a "welcome surprise”.

Meanwhile, The Australian’s John Durie says the white paper on Australia in the Asian Century is a good start, but we need a broader, more coordinated debate about engaging with our neighbours.

The Australian’s economics correspondent, Adam Creighton, is also on the quality of political discourse in Australia, but through the prism of economics.

"Simple economics helps explain why: humans naturally want to maximise their well-being. Given the chance of winning a prize, the rational response is to curtail any behaviour that might reduce that chance. As the prize gets bigger, so does the desire to lift the probability of winning. The iron law of rising prices and falling demand applies as much in the supermarket as it does in politics. As the power, prestige and spoils of winning and holding office have grown inexorably, the price of political principle, the cost of candour, have skyrocketed.”

The Distillery frankly loves this sort of analysis.

Staying with the convergence of economics and politics, Fairfax’s Michael Pascoe makes the interesting observation that the lift in the Westpac/Melbourne Institute consumer confidence index came largely from Coalition voters.

The Australian’s economics editor, David Uren, looks at some of the choice phrases being employed by senior members of the Nationals in response to China’s moves to help Western Australia finally secure a sugar mill for Ord River.

The Australian Financial Review’s international editor Tony Walker joins a growing list of commentators who believe the Chinese leadership transition could be a more significant event than the recently completed election in the US.

The Australian Financial Review’s Matthew Stevens tires to make sense of the unfathomable mess that Qube Logistics has been forced to navigate by the Commonwealth in its quest to build something called an "intermodal warehouse” in Moorebank, southeast of Sydney. It’s a head-scratching story, to say the very least.

And finally, Fairfax’s Michael West reports that the threat of defamation proceedings against NSW farmer Bruce Robertson by Grid Australia, a story he’s been covering for some time, is now no longer a problem. The threats have been withdrawn and an apology has even been issued. It’s a terrific story.

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