Australian grain handler GrainCorp whiffed at the opening bid of potential suitor Archer Daniels Midland. The Illinois-based commodity heavyweight forced discussions of an acquisition after snapping up nearly 15% of GrainCorp's outstanding shares late last month.
On the same day it announced a 19% increase in net profit to $205 million for the fiscal year ending Sept. 30, the company said it had informed ADM that its offer of $11.75 (Australian) per share didn't pass muster: "The GrainCorp board has determined that the proposal materially undervalues GrainCorp and has advised ADM accordingly."
ADM's Oct. 19 offer represented a 33% premium to the pre-offer share price and would have totaled nearly $2.76 billion (U.S.) had the GrainCorp board accepted at first blush. Sources reported at the initial meeting between ADM executives and their Australian counterparts, GrainCorp chairman Don Taylor pushed for a $14 bid.
On Nov. 15, GrainCorp shares traded at $12.20 on the Australian Securities Exchange (ASX). Prices have remained well supported around that mark since the late October announcement of ADM's bid, when prices spiked as high as $12.75 in fairly heavy volume. In the weeks since the announcement, the firm has filed more than a dozen notices regarding changes to its "substantial" shareholders.
Its flurry of quarterly and year-end filings with the exchange last Thursday, however, presented the latest salvo in ADM's efforts to wrest control of the company. Fiscal Year 2012 highlights included a hike in EBITDA, up 18% to $414 million, as well as a hike in net profit, up 19% to $205 million.
Resting on that strength and projections for incremental underlying EBITDA of $110 million over the next four years, the GrainCorp board pressed for more cash on the barrelhead. ADM's immediate public response was predictably muted: "We note GrainCorp's response to our proposal. On Oct. 19, we approached GrainCorp's board with a proposal that represented a significant premium to the prevailing GrainCorp share price at the time of our approach. We believe it remains an attractive proposal."
Attractive or not, bagging GrainCorp now likely remains an imperative acquisition target for ADM… or some other suitor enticed by the obvious opportunities in the Asian sphere of influence.