Eastern states grain giant, GrainCorp, is weighing up a potential $2.4 billion takeover offer from an Australian investment syndicate.
The non-binding indicative proposal from Long-Term Asset Partners involves an acquisition, via a scheme of arrangement of all GrainCorp shares at a price of $10.42.
That’s almost a third more than the share price for Australia’s biggest listed agribusiness when trading closed at the end of last week at $7.30/share.
Back in late 2013 the federal government blocked a $3b takeover move for GrainCorp by US-based Archer Daniels Midland after deciding the bid was not in the national interest.
Newly- formed LTAP claims it does not intend to sell any of GrainCorp’s substantial Australian or overseas assets should its proposal be recommended by directors and ultimately supported by GrainCorp shareholders.
Little is known about the business making the offer, but the LTAP group was established by directors Tony Shepherd AO, Lance Hockridge, Andrea Staines and Chris Craddock to make long-term investments.
The group describes itself as an asset manager for a trust whose beneficiaries are Australian investors.
The board recommends shareholders take no action in respect of the LTAP proposal and await further information
GrainCorp’s board confirmed it would engage with LTAP in the context of the company’s current portfolio review to further assess the merits of the scheme of arrangement proposal, including the value offered compared to other value creation alternatives and strategies available to GrainCorp.
Directors had not, however, formed a view on whether the price offered under the LTAP Proposal was at a level which they were prepared to recommend to shareholders in the context of a change of control.
“Accordingly, the board recommends shareholders take no action in respect of the LTAP proposal and await further information from the board which will be provided as part of the ongoing portfolio review,” a company statement said.
“The Board requires additional information on the identity of the equity investors underpinning the LTAP proposal as well as the longer term financing plan and intentions for the business, to enable a detailed assessment of the impacts of the LTAP proposal on all of GrainCorp’s stakeholders including our shareholders, grower customers, trading partners and our people.”
GrainCorp said because its own portfolio review was well progressed and the LTAP proposal was not sufficiently certain, it would not be in shareholders’ interests for GrainCorp to suspend or terminate the other initiatives under assessment.
The board noted the proposal was subject to a number of conditions and involves a complex financing structure with significant leverage comprising $3.2 billion in acquisition facilities from Goldman Sachs and $400 million from Westbourne Capital.
“LTAP is a new entity and this would be its initial investment,” the company said.
“There is no certainty that the proposal will result in a binding proposal for GrainCorp, what the terms of any such proposal would be, or whether it will be recommended by the GrainCorp board.
“In particular, the LTAP Proposal and the acquisition financing facilities are conditional on due diligence which will be provided once appropriate confidentiality and standstill arrangements have been put in place including customary protections for GrainCorp.
GrainCorp has appointed Macquarie Capital as financial adviser and Gilbert and Tobin as legal adviser.
More to come