ADM may up GrainCorp offer | My Machinery
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ADM may up GrainCorp offer

Analysts expect US agribusiness giant Archer Daniels Midland (ADM) to increase its $2.8 billion offer for GrainCorp if it is to succeed in acquiring eastern Australia’s largest grains handler this year. ADM, one of the world’s largest processors of corn, oilseeds and wheat, is expected to be publicly quizzed by investors in the US on Tuesday when it hands down its second-quarter financial results. The Australian Financial Review reposrt there is speculation ADM could break its two-month silence and potentially sweeten its $12.20 a share offer. It told investors it was considering its options after GrainCorp knocked back its latest offer on December 13. “I would expect ADM will have to make some sort of comment about their offer,” RBS Morgans analyst Belinda Moore said. Ms Moore said the offer represented an enterprise value to earnings multiple of 8.3 times, which was well below acquisition multiples in the sector. She said GrainCorp was worth $14.40 a share, based on 9.5 times fiscal 2013 earnings. However, one fund manager said ADM would be in no rush to offer a higher price and was likely to sit on the sidelines with a lack of news flow acting to depress the share price. GrainCorp shares have weakened this year, dropping to $12.01 but recovering on Friday to $12.20. Poor summer weather has focused investor attention on earnings volatility for agricultural producers. Morningstar head of industrials research Peter Rae has recommended investors reduce their exposure to GrainCorp, which he valued at $10 a share. “GrainCorp has rejected ADM’s increased offer of $12.20 per share – as we expected – and we continue to think the shares will trade lower if ADM walks away and no other bidder emerges,” he said. ADM is under pressure to diversity its earnings after the US drought and challenging ethanol markets hurt its operations. JPMorgan has recommended investors sell ADM, in part due to its overly strong exposure to the North American market. Read More: http://www.theland.com.au/news/nationalrural/agribusiness/general-news/adm-may-up-graincorp-offer/2645216.aspx

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