Australian grain handler and maltster GrainCorp said on Monday that it had received an unsolicited A$2.4 billion (US$1.8 billion) takeover bid from little-known asset manager Long Term Asset Partners (LTAP), a consortium chaired by former Business Council of Australia president Tony Shepherd.
LTAP made a non-binding indicative all-cash offer of A$10.42 a share representing a 43 per cent premium to Graincorp’s Friday closing price of $7.30 a share. The company said it makes long-term investments and does not intend to sell any of the assets of GrainCorp should the scheme of arrangement proposal for 100 per cent of GrainCorp succeed.
Suffering from one of the worst crops in decades on the east coast of Australia where GrainCorp controls a vast storage and handling network and port facilities, the company’s share price had fallen about 18 per cent since its high this year in April.
“LTAP is a new entity and this would be its initial investment. The board requires additional information on the identity of the equity investors underpinning the LTAP proposal as well as the longer-term financing plan and intentions of the business,” said GrainCorp in a first statement.
So far, it is only known that LTAP is a newly formed trust whose beneficiaries are Australian investors. It is reported that the consortium is backed by German insurance giant Allianz, which will write a contract to close the weather risk and ensure that LTAP would be able to pay repayments of the A$ 6 billion in rising debt. Allianz is one of the world’s largest insurance companies with annual sales of € 126 billion last year and has a worldwide presence. In Australia, Allianz is the fourth largest general insurer and it is believed that it wants to strengthen its Australian business with this deal.
GrainCorp also said that LTAP’s proposal was based on a number of conditions and involved a complex financing structure with significant leverage including $ 3.2 billion from Goldman Sachs and $ 400 million from institutional investor Westbourne Capital. The board of GrainCorp announced that it has not yet formed a view on whether to recommend this offer to shareholders in the context of a change of control.
LTAP said in a press statement that the proposal is not expected to require approval from the Foreign Investment Review Board or the Australian Competition and Consumer Commission.
“Under our Proposal, GrainCorp shareholders have the opportunity to receive an immediate cash payment at a significant premium and at a price which we believe represents a very attractive value for the company,” said LTAP chairman Tony Shepherd.
“For growers, an acquisition by LTAP ensures ownership and control by an Australian-owned entity with a plan for the long-term development of GrainCorp’s assets and operations and, importantly, an optimistic view of future volume growth for Australian grain growers. We will continue to add value to growers’ grain through grain marketing services and oilseed and malt processing for domestic and international consumers.
Our ultimate capital structure will be investment grade and will include an allowance for significant future capital expenditure to facilitate growth for all stakeholders. Our plans for GrainCorp’s assets are focused on increasing volumes over time. There are many aspects of our strategy for the company’s future but increasing volumes is central. Keeping transport and handling costs as low as possible will be a major incentive to help farmers increase production. Increased production volumes are good for farmers and good for GrainCorp.”
It is not the first time that GrainCorp is subject of an unsolicited takeover bid. In 2013, Archer Daniels Midland (ADM), the US-based agricultural commodities merchant, announced a cash offer to acquire the outstanding common shares of GrainCorp for A$12.20 per share. In 2013, the Australian government said ADM’s proposed A$3.4bn takeover of GrainCorp was not in the national interest and rejected the sale. In 2016, ADM sold its 19.9 per cent stake in GrainCorp, which it had acquired during the takeover bid, for a sum of A$387 million (US$286.92 million). (inside.beer, 1.12.2016)
The new attempted takeover comes at a time when GrainCorp itself considers a bid for Cargill’s malting business. GrainCorp’s malting division is amongst the five biggest malting companies in the world and a purchase of Cargill Malt would make it number one in the malt world, ahead of competitors like Soufflet and Malteurop. (inside.beer, 12.10.2018)
GrainCorp was founded over 100 years ago by the Australian state of New South Wales as a Government Grain Elevator. It was privatized in 1992 with a majority of shares being transferred to grain growers, and listed on ASX in 1998. In 2009, Graincorp diversified into malting when it bought United Malt Holdings, a conglomerate of four leading malthouses on three continents. The attempt to add a fifth malting group in continental Europe in 2011 failed, when GrainCorp struggled with the complex structure of the beer and malt market in Germany. Last year the Australian company sold its German business at price which was reportedly much lower than the initial purchase price. (inside.beer, 16.5.2017)