A large United States-based agribusinesses has requested talks with Australian grains trader and maltster GrainCorp over a “potential transaction”, prompting speculation that GrainCorp is now a takeover target.
GrainCorp said on Friday that it had been advised by New York Stock Exchange-listed Archer Daniel Midlands (ADM) that ADM has acquired a stake in the company and that ADM wished to engage in talks with GrainCorp concerning a potential transaction.
According to its website, ADM is one of the largest agricultural processors in the world and is headquartered at Decatur, Illinois, in the United States.
It has 30,000 employees around the globe, more than 270 processing plants, 420 crop procurement facilities and “the world’s premier crop transportation network”.
GrainCorp said it had received no formal proposal from ADM.
“Should GrainCorp receive a proposal from ADM, the board will review the proposal as well as other options to maximise value for GrainCorp shareholders,” GrainCorp said in a statement.
The announcement by GrainCorp followed the trade of a substantial parcel of GrainCorp shares at around 7am (AEDT) on Friday, at 11.75 per share.
GrainCorp shares were subsequently placed in a trading halt, having closed on Thursday at $8.85.
Morningstar analyst Peter Rae said it certainly looked like GrainCorp was now a takeover target.
He said ADM may be attracted to GrainCorp’s edible oils business, which is a combination of the recently acquired Gardner Smith Group and Integro Foods.
Mr Rae also said GrainCorp’s storage and logistic assets were of strategic value, enabling access to the region.
“So it’s not surprising that someone is thinking of having a go at them (trying to take over GrainCorp),” Mr Rae said.
He said other large grain companies, perhaps from Canada or Asia, could also make a play for GrainCorp.
Mr Rae said the $11.75 paid for each GrainCorp share in the large transaction early on Friday was at a substantial premium to GrainCorp’s last trading price.
“But you could see it potentially higher in a competitive (bidding) situation,” he said.
The trading halt on GrainCorp shares will last until the start of trading on Tuesday, October 23, or when GrainCorp makes an announcement to the market.
GrainCorp’s storage and logistics assets in Australia include more than 280 storage sites, 19 trains, seven bulk ports and two container ports.
In May, GrainCorp reported a $133.7 million net profit for the six months to March 31, up 52.5 per cent on its prior corresponding period figure of $87.7 million.
The company said in May that it expected to make a full year net profit of between $185 million and $205 million – excluding significant items – up from its previous forecast of $165 million to $185 million.
In August GrainCorp said it expected its underlying profit to be at the upper end of its May guidance of $185 million to $205 million.
