Archer Daniels Midland is in talks with Australian commodity giant GrainCorp after putting forward an offer just shy of US$2.8bn (A$2.7bn) for a cash takeover.
The discussions come after the US firm upped its shares in GrainCorp by 10% to 14.9% at a price of A$11.75 (US$12.10) per share.
A trading halt was in place at GrainCorp until today while talks took place. The firm said its board is reviewing ADM’s proposal but has “not yet formed a view on its merits”.
GrainCorp shares soared in Sydney on Monday 22 following the offer, closing at A$12.30 (US$12.68) per share.
It has appointed Credit Suisse and Greenhill as financial advisers and Gilbert + Tobin as legal advisers.
David Weintraub, ADM spokesperson, told BakeryandSnacks.com that the firm will continue its direct discussions with GrainCorp.
“We anticipate that an ADM acquisition of GrainCorp would meet ADM’s key financial hurdles,” Patricia Woertz, chairman and CEO of ADM, said.
Connecting with key global supply regions
“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,” Woertz said.
“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,” she added.
Foreign takeovers rife
GrainCorp is one of Australia’s last remaining independent grain traders headed for a possible foreign takeover. It has more than 280 grain elevators in Australia boasting up to 20m tons of storage capacity and buys and sells more than 4.5m tons of wheat, barley, sorghum and canola each year to local and international customers.
A study last year from Citi Investment Research analyst Tim Mitchell, estimated that investments of more than $12bn have been made in Australia’s agricultural businesses and land in the last four years.
Australia’s sugar production sector has a strong level of foreign investment; more than 60%. In February this year Thai sugar company Mitr Phol secured a majority stake of 57.69% in Australian sugar mill MSF for A$300m, and in 2010 Singapore’s Wilmar International bought out Australian sugar mill Sucrogen for A$1.75bn.
In December 2011, China’s Bright Food Group also snapped up a 75% share in Manassen Foods.