Australia’s largest listed bulk grain handler GrainCorp Ltd said on Monday it received an unsolicited A$2.38 billion ($1.8 billion) takeover approach from a little-known asset manager, catapulting its shares nearly a third higher.
GrainCorp said privately held Long-Term Asset Partners (LTAP), made an all-cash approach of A$10.42 a share, a near-43 percent premium to the stock’s closing price on Friday. Confirming the approach, LTAP said it was an asset manager for a trust whose beneficiaries were Australian investors.
Shares in GrainCorp recorded their biggest one-day move in five years, jumping 27 percent by 0110 GMT to $9.25. But that was still well below the indicative offer price, reflecting uncertainty among investors on whether a deal would go ahead.
GrainCorp said it would consider the proposal but needed to know more about the financial backers of LTAP and its plans for the target. LTAP didn’t disclose details of its financial resources.
The company also noted the “complex financing structure” of the deal involving A$3.2 billion in acquisition facilities from Goldman Sachs and A$400 million from Westbourne Capital.
The approach comes as a drought wilts crops across Australia’s east coast, limiting GrainCorp’s ability to earn revenue from international grain trading.
“The timing of the offer is opportunistic,” said Belinda Moore, an equity analyst at RBS Morgans.
“With the next opportunity for GrainCorp to possibly benefit from materially improved conditions not until 2021, shareholders will likely see this offer as attractive.”
Analysts said the identity of LTAP’s financial backers, however, would be a key determinant in the success of its bid. Australian takeover law means the deal will draw the attention of regulators, and should it transpire that LTAP has foreign backers, it will face additional obstacles.
Australia’s conservative government must return to the polls in less than six months, and will need to win support from its traditional electoral base – rural voters, many of whom will likely have concerns about a sale of GrainCorp.
“Growers will want to know who is behind the bid and what their intentions are but whoever they are, they are going to want a return on their investment. Growers aren’t keen on paying a cent more,” said Dan Cooper, a farmer in Caragabal, New South Wales, located 400 km (250 miles) west of Sydney.
The Australian government blocked a A$2.8 billion takeover of GrainCorp by U.S. agribusiness giant Archer Daniels Midland Co in 2013 – bowing to pressure from grain growers.
Aware of the need to win favour with farmers, LTAP said it would not sell any GrainCorp asset.