FOR the second time in as many months, directors of Australian grain handler GrainCorp rejected an acquisition offer from Illinois-based Archer Daniels Midland Co. (ADM).
A sweetened offer of $12.20 (Australian) per share, announced Dec. 4 (Feedstuffs, Dec. 10), "materially undervalued GrainCorp," according to a company statement released Dec. 13.
Following the announcement, trade in the firm's stock jumped on the Australian Securities Exchange to more than 3.78 million shares -- more than triple the average volume of the previous week. Shares in GrainCorp closed last Thursday at $12.30 and have moved in a range essentially between $11.80 and $12.30 since ADM's initial takeover bid was announced Oct. 18 (Feedstuffs, Oct. 22).
ADM has made its desire to acquire GrainCorp exceedingly clear, moving from a 4.9% ownership stake in the company prior to its October bid to a 14.9% economic interest and acquiring an additional 5% of the company's shares at its revised offer of $12.20. ADM now effectively owns one-fifth of GrainCorp.
GrainCorp said its directors still feel that the ADM offer undervalues the company but will "be constructive in any dealings" with future proposals or suitors "in the best interests of shareholders."
It is in ADM's best interest, as GrainCorp's largest shareholder, to get a deal wrapped up sooner rather than later. GrainCorp's leadership has been rumored to be holding out for at least $13 per share, with chairman Don Taylor telling Australian media in October that the company is worth at least $14 per share.
ADM specifically touted its large ownership stake in a public response to GrainCorp's latest rejection.
"We believe that our revised proposal properly values GrainCorp's business, taking into account GrainCorp's 2012 results and its new initiatives announced Nov. 15. ... We intend to consider all our options with respect to GrainCorp and our 19.9% shareholding."
What those options are seems unclear at this point. Analysts suggested that ADM has likely already tipped its hand with the second, higher offer and may wait patiently for GrainCorp to deliver a disappointing earnings report at some point in the future to re-energize the takeover attempt.
On the other hand, given the importance of the GrainCorp deal to ADM's global growth strategy, executives may feel compelled to offer another 40-50 cents to seal a deal.