Bold bid to purchase GrainCorp

UPDATE: BULK grain handler GrainCorp is considering a takeover proposal worth an estimated $2.4 billion from Long-Term Asset Partners Pty Ltd.

Unanswered questions: The GrainCorp board has expressed concern over several issues, including the identity of investors underpinning the proposal.

UPDATE: BULK grain handler GrainCorp is considering a takeover proposal worth an estimated $2.4 billion from Long-Term Asset Partners Pty Ltd.

The grain handling giant received a non-binding proposal at the end of November, to acquire the company.

But the GrainCorp board expressed concern over long-term financial planning of the business and the identity of investors underpinning the proposal.

The bid valued GrainCorp stocks at $10.42 a share, representing a premium of 42.7 per cent to the last closing price of GrainCorp shares of $7.30 on November 30.

LTAP chairman Tony Shepherd said the proposal would ensure stable development of GrainCorp, and would guarantee ownership and control remained in Australian hands.

“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,” Mr Shepherd said.

“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 if 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.”

Yesterday the GrainCorp board said “the proposal is subject to a number of conditions and involves a complex financing structure with significant leverage comprising $3.2 billion in acquisition facilities from Goldman Sachs and $400 million from Westbourne Capital”.

“There is no certainty that the proposal will result in a binding proposal for GrainCorp, what the terms of any such proposal would be, or whether it will be recommended by the GrainCorp board.

“In particular, the LTAP proposal and the acquisition financing facilities are conditional on due diligence which will be provided once appropriate confidentiality and standstill arrangements have been put in place including customary protections for GrainCorp.”

The GrainCorp board have not formed a view on the price offered for a change in control.

“Furthermore, 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 for the business,” the statement read.

GrainCorp have appointed Macquarie Capital (Australia) Limited as financial adviser and Gilbert + Tobin as legal adviser.

A decision regarding the proposal will be made at or before GrainCorp’s annual general meeting in February 2019.