ADM finally lands GrainCorp takeover bid

Published on: Apr 25, 2013

Patience is a virtue, and Archer Daniels Midland was rewarded for its relative virtuousness last week, announcing it had signed a takeover bid implementation deed with Australia’s largest grain handler in a deal worth A$3.4 billion. The April 25 agreement between the two major players came just 133 days after GrainCorp publicly rebuffed ADM’s advances for a second time in as many months. 

Under the terms of the agreement, ADM would acquire GrainCorp for a cash offer valued at A$12.20 per share, with GrainCorp shareholders earning a A$1.00 per share dividend from the proceeds at closing, with an additional A$0.035 per share added for each month beyond October 1, 2013 until closing of the transaction.

Over the course of six weeks last fall, ADM acquired a 19.8% stake in the Australian firm, becoming – by far – the company’s largest shareholder. The Illinois-based conglomerate paid an average of A$11.24 per share for those shares, and on December 4, 2012, issued an offer to acquire the remainder of the GrainCorp’s shares for $12.20 – an offer GrainCorp’s leadership at the time said “materially undervalued” their operation (Feedstuffs, Dec. 17, 2012). 

What a difference a quarter can make.

Following the December rejection, ADM essentially let the issue drop – at least publicly. Analysts speculated that GrainCorp’s executives and directors were holding out for ADM to sweeten their offer, something the suitor had done once already, or for another white knight to emerge with a better deal. 

As the months passed, no such deal appeared, leaving the company right back where it started: with its largest shareholder offering a near 50% premium to the firm’s 2012 pre-takeover share price. GrainCorp’s directors now say they will unanimously recommend the offer to the shareholders pursuant to basic due diligence and no superior proposal materializing at the 11th hour.

GrainCorp is one of the leading agribusiness giants in the Asia-Pacific realm, handling roughly 75% of Australia’s annual grain production and 90% of eastern Australian exports, in addition to its major presence in malt, flour and edible oils production.

ADM delayed its quarterly financial results release by one day to accommodate the final day of its due diligence under the terms of the takeover implementation deed. It will announce its first quarter results and its decision to proceed with the GrainCorp takeover May 1.