LTAP walks away from its bid for GrainCorp

Australian agricultural companies are wrestling with tough conditions.

Long Term Asset Partners has abandoned its $3.3 billion takeover bid for the country’s largest grain handler, GrainCorp.

The collapse of the deal, reported by DataRoom online yesterday, was due to a lack of clarity around the industry structure and model of the business. The offer for the country’s largest grain handler was announced by GrainCorp in December and came with a highly complex derivative structure derived by Chris Craddock, who has been working on the plan for some time.

But LTAP said in a letter to GrainCorp it had assembled a team of tier-one experts to assess GrainCorp from the outside and it was a serious bidder, acquiring 4.2 per cent of the business.

GrainCorp told the market last night it had been advised by LTAP it would not proceed with its proposal.

Included in the LTAP consortium was former Aurizon boss Lance Hockridge and businessman Tony Shepherd. Insurer Allianz was also backing the deal as a financier.

Goldman Sachs was advising LTAP, while GrainCorp was advised by Macquarie Capital.

LTAP offered $10.42 a share for the company on November 12, which was a 43 per cent premium to its closing share price at the time. GrainCorp shares closed at $8.75 yesterday.

It comes as Australian agricultural companies wrestle with tough conditions.

GrainCorp has been under pressure from shareholders to improve its performance and is thought some have been eager for the business to be sold.

However, adviser Blackpeak Capital has been working on strategic options for the business, including a sale of its malt operations. While advanced talks have unfolded with a potential buyer of malt, it is thought they have not met the company’s price expectations.

In April, GrainCorp announced it would carve out its malting division into a new Australian-listed vehicle, a move observers say was likely to lift the value of the business and could prompt an acquirer to pay more.

Speculation has mounted that GrainCorp boss Mark Palmquist could be part of a buyout of the company after it was announced he would step down as the GrainCorp boss and instead run the newly listed global malting and craft brewing operation.

The remaining assets of GrainCorp would include its global and local grain-handling, storage, trading and processing operations. GrainCorp recently sold its Australian Bulk Liquid Terminals business for $350 million to ANZ Terminals. That deal was subject to no material transaction before May 10.