Australia’s Graincorp Receives Sweetened Bid Offer From US Giant ADM, But Still Not Convinced to Turn Over Tables

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By Esther Tanquintic-Misa | December 4, 2012 3:38 PM EST

U.S. agribusiness giant Archer Daniels Midland Co (ADM) may have upped its takeover bid into GrainCorp Ltd., Australia's largest listed grain trader, as well as bought an additional 5 per cent of the company, but Australia's last standing independent grains handler remain unconvinced it should sell itself to its present persistent suitor.

In a note to clients, Belinda Moore, analyst from RBS Morgan, said the sweetened bid was still not enough to entice GrainCorp.

"[It's] still not enough for the irreplaceable nature of GrainCorp's assets," she said. "We note the board recently stated that ADM's offer of $11.75 materially undervalued the company [and] don't view the increased offer as a material uplift in valuation," she added.

On Monday, ADM submitted a new improved offer of A$12.20 a share in cash, up by 3.8 per cent, that puts the Australian grains handler's equity value at A$2.8 billion ($2.9 billion). It likewise purchased an additional 5 per cent of GrainCorp's shares at the new offered price, effectively bringing ADM's total stakes in the company to 19.9 per cent, but just under the level where it could make a formal bid for the entire company.

But "we recommend shareholders hold on for a potentially higher offer," Ms Moore advised.

ADM would have to offer A$13 a share to close the deal it wants, The Financial Times reported, citing Stuart Jackson, a JPMorgan analyst.

ADM "would be able to bump its offer by another A$100-A$200m (A$0.44-A$0.88) without materially impacting the attractiveness of the deal or its credit position," Mr Jackson said.

There are other analysts, however, who believed the new bid offer may already entice the board of GrainCorp.

"If ADM does not gain board support, a hostile bid that gains a controlling stake would be a good outcome for ADM, which could mop up the remainder at a later date if a poor wheat harvest depresses the share price," Dennis Hulme, BBY analyst, said.

GrainCorp said it will review the higher offer, but made no conclusive remarks.

"The GrainCorp board will review the revised proposal and will advise the market in due course," the company said in a statement on Tuesday.

In November, Graincorp rejected a $2.68 billion offer from the same suitor, saying it "materially undervalues" the company.

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