American food giant Archer Daniels Midland (ADM) is a step closer to taking over Australia’s largest grains handler after GrainCorp directors urged shareholders accept a $3 billion offer.
Shareholders are widely expected to accept the offer in the absence of a superior bid.
Still, GrainCorp has left the door open to any last minute offers as ADM Australia awaits approval from the Foreign Investment Review Board (FIRB) and Chinese regulators.
Under the deal, shareholders will receive $13.20 per share, or around a 30 cent premium on the company’s latest share price.
GrainCorp chief executive Alison Watkins said no superior proposal had been received by the GrainCorp Board and independent expert Grant Samuel concluded the offer was “fair and reasonable,” estimating the underlying value of Graincorp at between $12.74 to $13.97 per share.
“That certainly vindicates the view of directors,” Ms Watkins told analysts in a conference call on Monday.
“Directors believe that our share price would fall if the offer wasn’t successful and no superior proposal emerges, at least in the near term.”
Regulatory approvals were a matter for ADM but, in the meantime, Graincorp could continue discussions with other parties, she said.
“There’s no break-fees that apply to this transaction so we continue to be focused on getting the best possible outcome for our shareholders,” Ms Watkins said.
The deal needs approval from the FIRB, the Australian Competition and Consumer Commission (ACCC) and Chinese regulator MOFCOM.
The offer comprises a payment from ADM Australia of $12.20 a share and permitted dividends totalling $1.00 per share.
Archer Daniels Midland Australia, a wholly-owned subsidiary of Archer Daniels Midland Company, already owns 19.5 per cent of Graincorp.
Graincorp recently reported a net profit of $88 million for the six months to March 31 as harvests normalised, down from $133.7 million in the same period last year.
It has spent $20 million as part of ADM’s takeover move, along with acquiring the Gardner Smith and Integro food oils businesses.
Morningstar analyst Peter Rae said shareholders would receive reasonable value out of the ADM deal, adding that other bidders were unlikely to emerge at this late stage.
“Barring any regulatory issues, the deal will probably go through,” Mr Rae said.
He said FIRB approval was the biggest hurdle but it would probably be “okay”.
Graincorp’s share price would most likely sink if the deal fell over.
At 1310 AEST, Graincorp shares were three cents higher at $12.50.
