Australia's leading agribusiness, GrainCorp Limited, has
turned down Illinois-based food processor,
Archer Daniels Midland Company
) raised acquisition bid, stating that the offer still
undervalues the former.
ARCHER DANIELS (ADM): Free Stock Analysis
BUNGE LTD (BG): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis
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Archer Daniels had upped its cash offer for GrainCorp by 3.8% to
A$12.20 per share on Dec 3, from the initial bid of A$11.75 per
share proposed on Oct 19. Additionally, the new bid represented a
premium of about 40% to GrainCorp's closing price at the time the
initial offer was made. The revised bid maintained the clause of
paying GrainCorp's latest dividend of A$0.35 per share that was
declared on Nov 15. This brings the total revised offer price to
about A$12.55 per share or A$2.9 billion.
Archer Daniels' interest in acquiring GrainCorp is in sync with
its ongoing portfolio management initiative. Archer Daniels'
strategy focuses on expanding its Agricultural Services and
Oilseeds businesses across the globe by investing in key supply
areas beyond national borders. Apart from making way for the
company's strategy of solidifying its global footprint in the key
agricultural regions via acquisitions and joint ventures, the
buyout is expected to help the company ease its financial
constraints as GrainCorp is a well-managed company.
Moreover, Archer Daniel's union with GrainCorp is expected to
position the latter well to broaden its scope, by channeling
Australia's farm produce to meet the growing demand for crops and
food in the global markets, particularly in Asia and the Middle
Currently, Australia's agricultural business presents an
overwhelming opportunity for agri-based companies seeking
expansion opportunities. Australia is a major exporter of many
commodities, from minerals such as iron ore to agricultural goods
As on Dec 3, Archer Daniels had an economic interest of about
19.9% in GrainCorp shares, which has been approved by the
Australian Foreign Investment Review Board. At the time of the
initial offering made in October, the company had about 14.9%
interest in the Australian farm products dealer.
Archer Daniels Midland procures, transports, stores, processes,
and merchandises agricultural commodities and products in the
United States and internationally. The company has three major
business segments: Oilseeds Processing, Corn Processing, and
Agricultural Services. Currently, Archer Daniels Midland has
30,000 workers around the world and runs around 270 processing
plants and provides 420 crop procurement facilities. The
company's prime competitors include Cargill Inc.,
Tyson Foods Inc.
) and Corn Products International Inc.
We maintain our long-term 'Neutral' recommendation on the stock.
The company also maintains a Zacks #3 Rank, implying a short-term