Under the terms of the proposal, GrainCorp can’t solicit alternative proposals and needs to give ADM two days to match a superior proposal.
“We have had contact with other parties directly and through our advisers,” Watkins said. “At this stage we have this concrete proposal from ADM, which we believe represents very good value for our shareholders.”
With tax credits, Australian shareholders of GrainCorp stand to receive about A$14.13 a share if the deal proceeds, Belinda Moore, a Brisbane-based analyst with RBS Morgans Ltd., said in an e-mailed note. That equates to a payment of 10.3 times earnings before interest, tax and depreciation for fiscal 2014, and compares with an average acquisition multiple for Australian and offshore agribusinesses of 9.5 to 9.7 times forward earnings, Moore said.
ADM, which got 52% of its sales from the U.S. in its last fiscal year, has been working to increase foreign revenue. The company made its initial approach in October, and raised its bid by 3.8% to A$12.20 a share in December, before announcing another sweetener yesterday.
“They’re trying to do the best they can by existing shareholders and say that ‘this is probably a reasonable offer,’” said Paul Jensz, a Melbourne-based analyst at PhillipCapital Ltd. “The market would be a bit surprised, but they’ve had a bit more time to think about it and apparently no other party has put in anything formal.”
There were $85 billion of takeovers in 2012 involving companies in Australia, the biggest exporter of iron ore, coal and alumina, and the second-biggest shipper of wheat last year. That compares with $144.5 billion of deals in 2011.
GrainCorp, which traces its roots to 1916 and the Grain Elevators Board of the New South Wales state agriculture department, handles as much as 60% of eastern Australia’s grain crop and has about 20 million metric tons of storage capacity at more than 280 inland grain-handling sites, according to the company.
Australia stripped AWB of its wheat export monopoly in 2006 after an inquiry found it was among firms that made illegal payments to win contracts from the former Iraq regime of Saddam Hussein under the United Nations’ oil-for-food program.