GrainCorp shares soared by more than 40 per cent after US-based food processing giant Archer Daniels Midland Company (ADM) proposed a $2.68 billion takeover of the Australian grains marketer.
GrainCorp shares closed on Monday up $3.45, almost 39 per cent higher, at $12.30 after coming out of a trading halt when they were at $8.85. They briefly went as high as $12.69.
ADM is prepared to pay $11.75 in cash for each GrainCorp share, valuing GrainCorp at $2.68 billion.
Morningstar analyst Peter Rae said investors appeared to believe that GrainCorp was worth more.
“The market is expecting that there will probably be a higher offer. The offer from ADM is only indicative at this stage,” Mr Rae said.
He said it was hard to know if there would be other parties interested in GrainCorp but the ADM proposal was likely to flush them out.
GrainCorp said on Monday that it is reviewing ADM’s proposal.
GrainCorp confirmed it had received an indicative, non-binding acquisition proposal from ADM, after the US company last week increased its stake in GrainCorp to 14.9 per cent.
“The GrainCorp board is reviewing the proposal and has not yet formed a view on its merits and will keep the market informed of any material developments,” GrainCorp said in a statement.
ADM said in a statement that on Thursday last week, it had lifted its interest in GrainCorp to 14.9 per cent, from 4.9 per cent.
ADM said it had approached GrainCorp with the aim of reaching an agreement under which GrainCorp’s board would recommend to GrainCorp shareholders a cash acquisition by ADM.
Any agreement would be subject to satisfactory due diligence, regulatory approvals and other conditions.
“Our investment in GrainCorp is part of our ongoing portfolio management and is consistent with our strategy of growing our agricultural services and oilseeds businesses by investing in key supply regions outside the United States,” ADM chairman and chief executive Patricia Woertz said in the statement.
“GrainCorp is a well-managed company, and together with ADM would be better positioned to connect Australia’s farmers with growing global demand for crops and food, particularly in Asia and the Middle East.”
ADM, headquartered in Illinois in the US, is one of the largest agricultural processors in the world.
The New York Stock Exchange-listed company has a market capitalisation of $US18.8 billion.
It has 30,000 employees around the globe, more than 270 processing plants, 420 crop procurement facilities and a significant crop transportation network.
GrainCorp, which markets grain and agricultural products such as wheat, barley and canola, had a market capitalisation of $2.02 billion when its shares were at $8.85.
Graincorp’s storage and logistics assets in Australia include more than 280 storage sites, 19 trains, seven bulk ports and two container ports.
It also provides malt products to brewers and distillers.
