GrainCorp confirms multi-billion dollar takeover bid

Under moniker of Long-Term Asset Partners, group of Australian investors make bid for full control of agribusiness

GrainCorp confirms multi-billion dollar takeover bid
The total value of the bid is more than $3.3 billion


Agribusiness GrainCorp confirms it has received a non-binding, indicative proposal from Long-Term Asset Partners (LTAP) for 100 per cent control of the company at $10.42 a share.

LTAP is "an asset manager for a trust whose beneficiaries are Australian investors", whose directors include acclaimed business identity Tony Shepherd, Chris Craddock, former Aurizon Holdings boss Lance Hockridge and former Aurizon director Andrea Staines.

This is the recently formed investment group’s first ever bid.

The announcement caused GrainCorp’s share price to skyrocket from $7.30 on November 30 to a high of $9.37 on December 4 amid the news.

The GrainCorp board says the proposal involves a "complex" financing structure including leverage of $3.2 billion in acquisition facilities from Goldman Sachs and $400 million from Westbourne Capital.

LTAP reportedly does not intend to sell any GrainCorp assets.

Furthermore, the Financial Review’s  Street Talk notes LTAP has sought out German insurance giant Allianz "to take the agricultural risk associated with owning the company, which would underpin its proposed capital structure".

"Under the proposal, Allianz would write a contract to take out the weather risk and ensure Long-Term Asset Partners would be able to meet repayments on its $3.6 billion of lined up debt," it says.

The GrainCorp board says the evaluation is ongoing and the proposal has not yet been reviewed in enough detail to allow directors to make a recommendation to shareholders.

"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," the board notes.

"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."

A previous bid for GrainCorp came in 2013, when former federal treasurer Joe Hockey scuppered US-based agribusiness Archer Daniels Midland’s takeover for $13.20 per share on "national interest" grounds.

Portfolio review

Alongside the review of the LTAP bid, GrainCorp also says it is undertaking an evaluation to improve value for shareholders following its disappointing 2018 financial year performance, where profits dipped in the midst of the eastern state drought.

Read more about GrainCorp's financial year results, here

These measures include:

  • value maximizing options for bulk liquid storage infrastructure assets;
  • options for maximizing the value of the global GrainCorp Malt portfolio, including through participation in ongoing industry consolidation or an ownership separation of these assets; and
  • initiatives to enhance the global grain infrastructure capabilities, both internationally and domestically, by progressing the initiatives to simplify the eastern Australia grains operating structure to better serve customers and reduce costs.

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