AUS: GrainCorp backs sweetened ADM takeover bid
ADM ups GrainCorp bid
The board of Australian grain trader GrainCorp has backed an improved takeover bid from US agri-giant Archer Daniels Midland, which values the company at around A$2.6bn (US$2.7bn).
The offer, for a total value of A$13.20 per share, would see GrainCorp shareholders receive A$12.20 in cash plus dividends totalling A$1, GrainCorp said in a regulatory filing. The offer price represents a 49% premium on the closing share price of A$8.85 on 18 October last year, the last trading day prior to ADM's initial takeover approach.
The GrainCorp board said they would back the offer as long as certain conditions are met, including the proviso that a higher proposal is not made by a competing bidder. The companies have entered into an Implementation Deed, allowing ADM to undertake a "limited scope" of due diligence.
Last October, ADM initially proposed a takeover of GrainCorp that valued the company at $13.55 per share. This was rejected by the group as undervaluing GrainCorp's future potential worth.
Conditional agreement with Archer Daniels Midland Company ("ADM") that may lead to a takeover offer resulting in total value to shareholders of $13.20 per share (inclusive of dividends totalling $1.00)
GrainCorp Limited ("GrainCorp") advises that it has entered into a takeover bid implementation deed ("Implementation Deed") with ADM under which ADM, subject to the satisfactory completion of limited confirmatory due diligence, will make an off-market takeover offer to acquire all the outstanding shares in GrainCorp not already held by ADM ("ADM Offer").
If the ADM Offer proceeds, and is successfully completed, shareholders will receive $13.20 per share, comprising a cash payment of $12.20 per share under the ADM Offer and dividends totalling $1.00 per share1. The dividends are expected to be fully franked, providing up to an additional $0.43 per share for those shareholders who can capture the full benefit from franking on the GrainCorp dividends. In2.6 the event regulatory approvals are not achieved by 1 October 2013 an additional fully franked dividend of 3.5 cents per share will be payable for each full month for the period between 1 October 2013 and the date the regulatory conditions have been satisfied or waived, subject to GrainCorp being profitable over that relevant period. Shareholders have also received a fully franked dividend of $0.35 per share since ADM's initial approach was first announced on 22 October 2012.
1 Relates to dividends declared or determined by the GrainCorp Board on or after the date of this announcement.
If the ADM Offer proceeds, each GrainCorp Director has indicated that they would recommend the ADM Offer subject to:
there being no superior proposal;
an independent expert determining that the ADM Offer is fair and reasonable; and
the regulatory conditions being satisfied or waived by 31 December 2013.
Under the Implementation Deed, GrainCorp has permitted ADM to undertake a limited scope of confirmatory due diligence from 25 April 2013 to 2 May 2013. Subject to satisfactory completion of this due diligence on or before 2 May 2013, ADM will make a takeover offer on the terms described below.
Under the Implementation Deed, if ADM satisfactorily completes its limited due diligence, and the ADM Offer becomes unconditional, shareholders will receive $13.20 per share, comprising a cash payment of $12.20 per share under the ADM Offer and dividends totalling $1.00 per share.
The $13.20 payable to shareholders would represent a premium to the trading price of GrainCorp's shares as indicated below: Page 2 of 3
49% to the closing share price of $8.85 on 18 October 2012, the last trading day prior to ADM's initial proposal;
48% to the 1 month volume weighted average price to 18 October 2012 of $8.90; and
44% to the 3 month volume weighted average price to 18 October 2012 of $9.14.
If the ADM Offer is successfully completed, the total payments GrainCorp shareholders will receive from the time of ADM's initial approach in October 2012 are $13.55 per share (a 15% increase on ADM's initial proposal) plus up to an additional $0.58 per share for those shareholders who can capture the full benefit from franking on the GrainCorp dividends.
Key conditions to the ADM Offer include:
50.1% minimum acceptance;
Regulatory approvals, including approval of the Foreign Investment Review Board and The Ministry of Commerce of the Government of the People's Republic of China;
No prescribed occurrences and various other standard restrictions for offers of this nature on the conduct of GrainCorp's business during the ADM Offer period; and
No material adverse change in respect of GrainCorp during the ADM Offer period.
GrainCorp has agreed to certain exclusivity restrictions that prohibit it from soliciting, inviting or initiating any competing proposals and require GrainCorp to give ADM two days to match a superior proposal.
A complete copy of the Implementation Deed, which includes further details of the confirmatory due diligence process, will be lodged separately.
GrainCorp Chairman, Don Taylor, said:
"The GrainCorp Board believes that the ADM Offer highlights the strategic value of our business and unique assets, the program of strategic initiatives being undertaken and GrainCorp's enviable proximity to the fast growing Asian markets.
"GrainCorp will work with ADM to ensure that ADM's confirmatory due diligence requirements can be satisfied, following which a takeover offer would be made on the terms agreed.
"Assuming this is achieved, the GrainCorp Board of Directors intends to unanimously recommend the ADM Offer subject to there being no superior proposal, an independent expert determining that the ADM Offer is fair and reasonable and the relevant regulatory approvals being satisfied or waived by 31 December 2013."
GrainCorp will keep shareholders informed of any material developments and the GrainCorp Board notes that shareholders do not need to do anything at this stage.
Credit Suisse and Greenhill are acting as financial advisers and Gilbert+Tobin is acting as legal adviser.
Original source: GrainCorp
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