Takeover bid for GrainCorp

By Country News

GrainCorp shares surged by more than a third after the drought-hit grain handler received an all-cash $2.38billion takeover bid from little-known asset manager Long-Term Asset Partners (LTAP).

GrainCorp’s board said it would engage with LTAP with regard to an ongoing portfolio review of the company, and also assess merits of the proposal, which involves a buyback of $10.42 per share.

Shares in the company skyrocketed as much as 34 per cent in early trade on December 3.

But the board has yet to decide whether the price offered under the LTAP proposal is at a level it would recommend to shareholders.

‘‘The board considers that because the portfolio review is well progressed and the LTAP proposal is not sufficiently certain, it would not be in shareholders’ interests for GrainCorp to suspend or terminate the other initiatives under assessment,’’ the company said.

GrainCorp also noted the ‘‘complex financing structure’’ of the deal involving $3.2billion in acquisition facilities from Goldman Sachs and $400million from Westbourne Capital.

A drought-ravaged east coast cropping landscape and higher energy costs shrivelled GrainCorp’s full-year balance sheet in 2017-18, with profit dropping 43.7 per cent to $70.5million.

Last month GrainCorp cut about 50 jobs in middle management and administration on forecasts of a severely reduced summer harvest, with further cuts expected as a bleak 2019 looms.

While a rise in malt and oil revenue failed to offset a $380million drop in grain earnings, GrainCorp told investors its review aimed to maximise the craft beer-fuelled global malt portfolio via consolidation or an ownership separation of assets.

In 2013 the Federal Government bowed to grower pressure and blocked a proposed $2.8billion takeover of GrainCorp by American agri-giant Archer Daniels Midland Co.