--GrainCorp rejects ADM's revised offer of A$12.20 a share
--ADM considering "all options'
--Analyst skeptical grain traders will reach deal
SYDNEY--GrainCorp Ltd. (GNC.AU) Thursday rejected U.S.
agricultural giant Archer Daniels Midland Co.'s (ADM) revised A$2.8
billion (US$2.95 billion) bid, saying the offer still "materially
undervalues the company."
ADM raised its offer for the Australian grain exporter by 3.8%
to A$12.20 a share earlier this month, valuing GrainCorp at around
A$2.8 billion. That was up from its original October offer of
A$11.75, and represents a 40% premium to the closing price of
GrainCorp shares the day before the initial offer was unveiled.
Shareholders would also get to keep the dividend of A$0.35
announced Nov. 15 under the new proposal, which ADM said means that
the latest bid was equivalent to a higher offer of A$12.55 a
share.
GrainCorp, which last month reported record profit in fiscal
2012 and announced an investment program designed to raise earnings
by A$110 million by the end of fiscal 2016, said that even the
revised offer wasn't in shareholders' interests.
"The increase in the proposed price has not changed the Board's
view that ADM's proposal materially undervalues GrainCorp," the
company said in a statement. "GrainCorp's board will be
constructive in any dealings in relation to proposals that have the
potential to be in the best interests of shareholders."
ADM said its new proposal offered "more certainty, greater value
and immediate realization of potential future value for GrainCorp
shareholders than GrainCorp's stand-alone plan.
"We intend to consider all our options with respect to GrainCorp
and our 19.9% shareholding," the U.S. company said in a
statement.
ADM is one of the world's largest soft-commodity houses and part
of the so-called ABCD group of companies--which also include Bunge
Ltd., Cargill Inc. and Louis Dreyfus--that dominate the global
grain trade. Tight U.S. grain supplies have put pressure on profit
from its trading and ethanol businesses, driving a 60% slump in its
fiscal first-quarter earnings.
Against this backdrop, some investors have questioned whether
ADM can actually afford the deal--even at a price that sits below
the A$13-a-share-plus that some analysts argue GrainCorp should
expect.
Moody's Investors Service put ADM on negative outlook following
its bid for the East Australian grain handler, citing concern over
financing for the transaction and whether the deal represented real
integration value.
Write to Caroline Henshaw at caroline.henshaw@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires