-- Australia's GrainCorp accepts revised ADM offer
-- Deal would be Australia's 3rd-biggest food acquisition
-- GrainCorp would give ADM foothold in Asia
By Caroline Henshaw
(Adds Dealogic data on deal size in fifth paragraph.)
SYDNEY--Archer Daniels Midland Co. (ADM) is close to executing
Australia's third-biggest food deal after the board of local grain
exporter GrainCorp Ltd. (GNC.AU) accepted an improved offer from
the U.S. agriculture giant.
ADM, with a market value of almost $22 billion, agreed to pay
12.20 Australian dollars (US$12.60) cash per share for GrainCorp,
valuing the Sydney-based company at A$2.8 billion, both companies
said in separate statements. In a sweetened deal, GrainCorp
shareholders will receive A$1 a share in dividends, subject to due
diligence, raising the total sum to A$13.20 a share, or A$3.4
billion.
ADM's purchase would leave almost all of the grain-handling
infrastructure in Australia--one of the world's largest wheat
exporters and the beachhead to Asia's booming food markets--in the
hands of foreign companies.
The dismantling of the former wheat monopoly AWB in 2008 paved
the way for the entry of major international players into the
industry. The following year, Canada's Viterra Inc., now owned by
Glencore International PLC, bought ABB Grain Ltd., while Cargill
Inc. took over AWB's grain assets from Agrium Inc. in 2010.
ADM's bid for GrainCorp, if successful, would be Australia's
third-largest largest food-and-beverage takeover, following SAB
Miller PLC's purchase of Foster's Group Ltd. and Japan's Kirin
Holdings Co. Ltd.'s acquisition of Lion Nathan Ltd., according to
Dealogic. It would also be ADM's biggest purchase, dwarfing its
acquisition of W.R. Grace & Co.'s cocoa business for $470
million in 1996.
For ADM, which has been seeking to diversify its largely
U.S.-focussed grain business, it's a price worth paying. GrainCorp
is the last of Australia's large agricultural businesses still
listed on the stock exchange. It has a network of 280 storage
facilities, and owns seven of the eight ports that ship around 90%
of the grain from Australia's east coast.
"The addition of GrainCorp to our global network would fit our
strategy and help to further connect Australia's growers with
growing global demand for crops and food, particularly in Asia and
the Middle East," ADM Chief Executive Patricia Woertz said in a
statement.
ADM was twice spurned in its efforts to buy GrainCorp last year.
The Illinois-based company already owns a 19.8% stake in GrainCorp,
which it began accumulating in October before launching a
succession of takeover offers that the Australian company's board
deemed too low.
Graincorp shares surged as much as 8.5% to a record high of
A$12.88 Friday on news of the revised offer. Its Chief Executive
Alison Watkins said on a conference call Friday she'd received
interest from other suitors, but declined to give more details. ADM
would have two days to match any higher offer, she added.
"We know that GrainCorp is an attractive business with
attractive assets," she said. "The level of interest reflects those
assets and the strategic significance that we have."
With tax credits, RBS Morgans Ltd. analyst Belinda Moore
estimates that GrainCorp shareholders would receive about A$14.13
from the offer--equivalent to 10.3 times earnings before interest,
tax and depreciation for fiscal 2014. That's well ahead of the
average multiple of between 9.5 and 9.7 times for agribusiness
deals, she said.
"The GrainCorp board have negotiated a great deal for
shareholders," she said later in a telephone interview. "Australian
investors haven't been willing to put a valuation on these
companies that international companies are."
Sujit Dey on J.P. Morgan's specialist equities sales desk said
the structure of the deal signalled that GrainCorp believed there
was a chance it may get another offer and showed how "desperate"
ADM was to take control of the Australian company.
"It is the first time that I can remember any deal where a break
fee is not in place," he said in a note to clients.
ADM's offer is subject to regulatory approval from several
authorities, including China, where GrainCorp owns assets. The
Ministry of Commerce of the Government of the People's Republic of
China took more than a year to approve Glencore's merger with
Xstrata PLC and is likely to be the slowest to give the nod,
GrainCorp's Ms. Watkins said.
Barclays PLC and Citigroup Inc. are advising ADM, while
Greenhill & Co. and Credit Suisse AG are advising
GrainCorp.
Write to Caroline Henshaw at caroline.henshaw@wsj.com (Gillian
Tan and Nathalie Tadena contributed to this article)
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