Australia: ADM increases takeover bid for GrainCorp

Archer Daniels Midland Co. (ADM) has sweetened its takeover bid for Australia's GrainCorp Ltd. (GNC.AU) by 3.8%, a deal that now values the wheat exporter at about A$2.8 billion.

Archer is now offering GrainCorp shareholders A$12.20 a share in cash, up from its October offer of A$11.75. Archer noted that the new offer represents a 40% premium to the last closing price of GrainCorp shares on the day before the initial offer was unveiled.

Shareholders would keep the dividend of A$0.35 announced Nov. 15.

"Our proposal also offers more certainty, greater value and immediate realization of potential future value for GrainCorp shareholders than GrainCorp's standalone plan," Archer Daniels Chief Executive Patricia Woertz said. She added that the revised proposal takes into account GrainCorp's results for the year, certain new initiatives and its recently announced ordinary and special dividends.

Archer owns 19.9% of GrainCorp's shares, the maximum allowed under the Australian Foreign Investment Review Board.

Last month, GrainCorp rejected Archer's offer, saying it "materially undervalued" its business as it reported its third-consecutive year of record profit--up 19% for the fiscal year ended September.

In October, ADM reported its first-quarter earnings slumped 60%, as tight U.S. grain supplies limited its grain-trading opportunities and triggered losses in its ethanol business. Both Fitch Ratings and Standard & Poor's placed ADM on watch for a potential credit downgrade following the bid for GrainCorp, citing concerns that the deal could increase the company's debt pile, and Archer has since said it plans to sell its stake in Mexican corn flour maker Gruma SAB (GMK) to help finance the deal.

ADM has also faced opposition from Australian politicians such as Shadow Treasurer Joe Hockey. Critics fear international companies will exploit Australia's natural resources without any concern for the long-term impact.

Shares of ADM closed Friday at $26.70 and were inactive in recent premarket trading. The stock has fallen 11% in the past year. Meanwhile, shares of GrainCorp edged up four cents in recent trading on the Australian Securities Exchange to A$11.94. The stock has risen 62% in the past year.

05 December, 2012