Australia's largest listed agribusiness, GrainCorp Limited, on Friday confirmed Archer Daniels Midland had purchased a 10% economic interest in the company in an off-market transaction, and is exploring options for a complete acquisition.
ADM previously held a 4.9% economic interest, bringing total interest in GrainCorp to 14.9%.
GrainCorp suspended trade in its shares after two block trades worth $536 million went through at just after 7 a.m. today, priced at $11.75 a share (AUD) and representing a 33% premium to Thursday's close of $8.85.
ADM has approached GrainCorp with the aim of arriving at an agreement under which GrainCorp's Board of Directors would recommend to its shareholders a cash acquisition by ADM. Any agreement would be subject to satisfactory due diligence, regulatory approvals and other conditions.
"Our investment in GrainCorp is part of our ongoing portfolio management and is consistent with our strategy of growing our Agricultural Services and Oilseeds businesses by investing in key supply regions outside the United States," said ADM Chairman and CEO Patricia Woertz.
"GrainCorp is a well-managed company, and together with ADM would be better positioned to connect Australia's farmers with growing global demand for crops and food, particularly in Asia and the Middle East."
GrainCorp told the exchange that it had received "no formal proposal" to date but if it did, it would be reviewed by the board along with "other options to maximize value for GrainCorp shareholders".
"We always believed that GrainCorp would be taken over at some point in the future given the strategic nature of its assets," RBS Morgans' agribusiness analyst Belinda Moore said, "however corporate activity in the stock has come sooner than expected."
"Given the scale and strategic nature of GrainCorp's assets and the fact that it is the last remaining significant grain company capable of being taken over in Australia, we expect a number of parties could be interested in GNC and a bidding war may emerge," Moore added.
Moore said Australian agribusiness takeovers were on average priced at nine times earnings and applying this multiple to RBS Morgans' average season forecast for 2013-14, resulted in a takeover price of $12.12 for GrainCorp.
"Our forecasts for FY13 and FY14 are in the process of being downgraded as seasonal conditions have deteriorated in recent months," Moore wrote in a note to clients.
The transaction is just one of many recently in Australia's food and agribusiness sector. Canada's Viterra purchased ABB Grain – now part of commodities trader Glencore International – and Agrium snapped up AWB. Wilmar owns 10% of the country's largest baker, Goodman Fielder.
Bloomberg this morning reported Wilmar International was the buyer of the GrainCorp stake. Wilmar and ADM have existing partnerships and on Thursday announced they obtained regulatory approvals for partnerships in global fertilizer and European vegetable oil. The two companies have also launched their partnership in global ocean freight.
Sources: Queensland Country Life; ADM