The A$11.75 per share bid from Decatur, Ill.-based Archer Daniels "materially undervalues GrainCorp," the target said, noting that it expected to increase its Ebitda by about A$110 million by 2016. GrainCorp on Thursday posted Ebitda of A$414 million for its 2012 financial year, an increase of 18% year-on-year.
GrainCorp's board will consider any offer that is in the interest of its shareholders but was not in "the mode of selling the company and we haven't put a price on the company," CEO Alison Watkins told reporters on a call Thursday.
"We have taken a good hard look at the fundamental value of our company [and] we have updated our growth initiatives," she said. "Our board was able to comfortably reach the conclusion that the ADM proposal materially undervalues us."
Archer Daniels made its indicative offer for GrainCorp. on Oct. 22, prompting investors to speculate that the handler of most of Australia's wheat exports as well as 35% of its malt, 40% of its edible oils and 35% of its flour could become a target for other bidders. Shares in GrainCorp have traded above Archer Daniels' offer since then and closed Thursday in Sydney at A$12.20, in line with their previous close.
Possible rival suitors include Bunge Ltd., Cargill Inc. and Louis Dreyfus Holdings BV. Despite GrainCorp's rejection of its first approach, Archer Daniels remains in pole position for a deal as it has accrued a 14.9% stake in its target. Agricultural trading companies have been regular targets of dealmaking in the past year, with Glencore International plc bidding C$6 billion ($6 billion) for Canada's Viterra Inc., while Japan's Marubeni Corp. agreed to pay $5.6 billion for the U.S.'s No. 3 grain handling company, Gavilon LLC.
Earlier this week, private equity got in on the act when Carlyle Group led a $210 million deal for a minority stake in Africa-focused agricultural commodities company Export Trading Group Pte. Ltd.
Archer Daniels said Thursday it had noted GrainCorp's response to its indicative offer, which it believes "remains an attractive proposal."
GrainCorp on Thursday heralded its standalone prospects as it posted results that included a 19% increase in net profit after tax, which rose to A$205 million.
The company's forecast of an A$110 million increase in Ebitda by 2016 is based on earnings from new projects, which will deliver an estimated A$45 million by 2015; on cost savings and improved operational performance, accounting for A$45 million of the increase; and better practices at its ports, delivering another A$20 million.
Watkins said the company's position in Australia meant that it was "at the geographic nerve center" of a growing demand for grains from Asia that would lead to a doubling of global trade by 2050.
The CEO declined to say if her board was willing to sit down with Archer Daniels to discuss its indicative offer. "We are focused on what is going to be best for our shareholders. ... We would naturally respond to any proposal that is in shareholders' interests," she said.
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