GrainCorp’s share price shot up today after US farm commodities giant, Archer Daniels Midland Company (ADM), confirmed an underwriting agreement to sell its contentious 19.9 per cent stake for $387 million.
“As part of our ongoing portfolio management, we carefully considered our equity investment position in GrainCorp and determined that we could better meet our long-term returns objectives by reallocating that capital,” said ADM chairman and chief executive officer Juan Luciano.
“This transaction will allow us to further reduce our invested capital, and it will provide cash that we can redeploy to higher-return investments as we continue to execute our balanced capital-allocation framework.”
ADM sold all of its issued capital in GrainCorp for $8.53 a share – an 18 cent discount on the Australian Securities Exchange price at the end of trading yesterday.
The price is, however, roughly what the one-time takeover aspirant had tried to sell its shares for in a rushed overnight offering to investment houses earlier this year.
GrainCorp’s share price rallied after news of ADM’s exit was confirmed, reaching $8.93 by midday Friday.
The transaction was executed by way of an underwritten sale to an underwriter, reported to be investment bank UBS.
ADM first began what became a protracted takeover attempt for GrainCorp in late 2012 when it launched a surprise share buying spree.
A year later its $3 billion takeover bid for the Sydney-based group was memorably blocked by then-Treasurer Joe Hockey after a split decision on the takeover’s merits by the Foreign Investment Review Board.
GrainCorp, Australia’s biggest listed agribusiness, was at the centre of an almost year-long public tussle during 2013.
Many farmers were suspicious and reacted angrily to the ADM takeover moves, particularly the potential implications for grain storage and handling network competition in Queensland, NSW and Victoria, where GrainCorp also controls most grain export terminals.
A Senate inquiry headed by Liberal Senator Bill Heffernan also grilled ADM and GrainCorp executives about the multinational grain marketer and processor’s business record, its trading power and the implications for grain trade competition in Australia.
The sale was opposed by key farmer lobby groups such as NSW Farmers Association and Victorian Farmers Federation.
In August this year ADM made an unsuccessful exit attempt, hoping to off-load its 19.9pc shareholding for about about $400 million.
The investment banks approached were, however, apparently unwilling to pay much more than about $8 for a serious stake in the big Australian bulk handler, trader and grain processor.
When news emerged of ADM’s sell-off intentions after almost four years on GrainCorp’s share register, the share price sank to $8.10.
ADM’s move at that time took GrainCorp management by surprise as there had been no previous indication it was planning to finally end its ties.
It is understood a handful of long-only institutions have snapped up the stock after last night’s deal, made at a slight discount price to yesterday’s $8.71 GrainCorp share value – but well below the May 2013 peak of $12.69/share.
The Illinois-based ADM ranks as one of the world’s largest and most aggressive agricultural processors and food ingredient businesses, with more than 32,300 employees serving customers in more than 160 countries.
It boasts 428 crop procurement locations, 280 ingredient manufacturing plants, 39 innovation centers and a premier crop barge, road and rail transportation network.
ADM makes ingredients ranging from flour to corn syrup, vegetable oils, flavourings and ethanol for industries ranging from stock feed, the industrial sector and food processing.
It’s investments include about 20pc in the big Singaporean palm oil and sugar business Wilmar.