Grains marketer and maltster GrainCorp has rejected a $2.68 billion takeover proposal from US-based food processing giant Archer Daniels Midland Company (ADM) whilst boosting its annual profit by 19 per cent and lifting its dividend.
ADM made an indicative takeover proposal for GrainCorp in October, at $11.75 in cash for each GrainCorp share.
GrainCorp On Thursday rejected the proposal as too low.
“The GrainCorp board has determined that the proposal materially undervalues GrainCorp and has advised ADM accordingly,” GrainCorp said.
GrainCorp chief executive Alison Watkins said the ADM proposal undervalued its competitive advantages in handling and processing wheat, barley and canola; and undervalued GrainCorp’s assets, growth prospects and ability to deliver set objectives.
“We’re very focused on getting on and running the business,” she said.
Following the rejection, ADM said its proposal represented a significant premium to the GrainCorp share price at the time of its approach.
“We believe it remains an attractive proposal,” ADM said in a statement.
GrainCorp made a net profit of $204.9 million in the year to September 30, up from $171.6 million in the prior year.
The result was at the top end of GrainCorp’s profit guidance of $185 million to $205 million given in May.
Ms Watkins said GrainCorp had had an “outstanding” year.
“We’re really confident that GrainCorp’s got some great momentum and this kind of improvement will continue for the future,” she said.
All of the company’s business units – storage, marketing, malt and mills – performed strongly, driven by strong volumes and greater value out of global operations.
GrainCorp was positioned to benefit from the growth in global demand for grain and processed grains, with global trade in its core grains expected to double by 2050.
Ms Watkins said GrainCorp had established a substantial presence in the edible oils sector and the company had a strong balance sheet enabling it to pursue growth initiatives.
GrainCorp created its oils business through the $472 million acquisition of Integro and Gardner Smith, which was completed in October 2012.
Ms Watkins offered no specific profit guidance for the current fiscal year, saying it was too early given the nature of GrainCorp’s business.
But she said the current eastern Australia harvest was generally proceeding well.
“Production forecasts average about 18.3 million tonnes,” she said.
“FY13 (the 2013 fiscal year) volumes will be supported by strong export demand and the above-average carry-in (grain in storage) of 4.3 million tonnes.”
GrainCorp said it would spend about $250 million on improving its businesses to generate an extra $110 million in annual earnings by the end of fiscal 2016.
GrainCorp said that in 2012 its storage and logistics business had handled 12.2 million tonnes of grain receivals – compared to 14.9 million tonnes in fiscal 2011 – plus six million tonnes’ “carry in” from the prior year.
The division exported 10.6 million tonnes compared to 8.1 million tonnes in the prior year.
GrainCorp’s marketing division traded a record 6.9 million tonnes of grain, including international sales of 4.4 million tonnes.
Malting sales volumes lifted to 1.32 million tonnes.
Shares in GrainCorp were 2.5 cents higher at $12.205 at 1415 AEDT on Thursday.
