April 26, 2013
Australia’s biggest agribusiness, GrainCorp is poised to accept a third takeover bid from its biggest shareholder the commodity giant Archer Daniels Midland (ADM). GrainCorp’s board of directors has given the US suitor the green light to make an off-market takeover offer next week to acquire all the outstanding 80.1 per cent shares in the big eastern States grain business, subject to the satisfactory completion of limited confirmatory due diligence. If successful, the deal would pay shareholders $13.20 a share, plus a dividend totalling $1/share. If regulatory approvals are not achieved by October 1 an additional fully franked dividend of 3.5 cents per share will be paid each following month until regulatory conditions have been satisfied or waived, assuming GrainCorp is performing profitably over that relevant period. ADM’s last offer made in November was for $12.20, and prior to that $11.75. Directors this morning indicated they will recommend the ADM offer subject to no superior proposal appearing and the preparation of an independent expert determining that the ADM’s proposal is fair and reasonable. GrainCorp also wants regulatory conditions to be satisfied or waived before December 31 or the deal will be off. The company has already permitted ADM to undertake a limited scope of confirmatory due diligence starting yesterday, until May 2. ADM will make its takeover offer, subject to satisfactory completion of this due diligence, on or before 2 May. The $13.20 payable to shareholders compares with Wednesday’s GrainCorp share price of $11.87. Agribusiness analyst with RBS Morgans Belinda Moore said ADM’s revised offer was an attractive outcome for GrainCorp shareholders. Based on her 2013 and 2014 financial year forecasts, the revised offer of equates to an earnings before interest tax depreciation and amortisation (EBITDA) multiple of 9.1 times and 9.8 times respectively. However, if successfully completed, the total payments shareholders would have received from the time of ADM’s first approach last October were equivalent to $13.55/share plus up to an additional 58 cents/share for those shareholders who captured the full benefit from franking on the dividends (equals $14.13).