May 16 (Bloomberg) -- GrainCorp Ltd., eastern Australia's largest grain handler, offered to buy livestock feed maker Ridley Corp. for A$415 million ($390.5 million) to gain 23 domestic grain mills and sales in North America.

The company bid one share for every nine of Ridley's, Sydney-based GrainCorp said today in a statement. The offer values Ridley at A$1.39 a share, or 6.9 percent more than yesterday's close. Sydney-based Ridley told shareholders to take no action until the board reviews the offer.

The global food crisis has sent prices soaring and crop traders including ABB Grain Ltd. have said demand for agricultural commodities will trigger takeovers. Buying Ridley gives GrainCorp control of Australia's largest stockfeed maker as well as 41 plants in the U.S. and Canada.

``This is important to diversify and to grow earnings,'' Belinda Moore, Brisbane-based analyst with ABN Amro Morgans Ltd., said by phone.

Ridley rose 10 cents, or 7.7 percent, to A$1.40 on the Australian stock exchange at the 4:10 p.m. close of trade. GrainCorp fell 63 cents, or 5.1 percent, to A$11.85.

The combined company would have a market value of more than A$1 billion, said GrainCorp, which has made more than $400 million of acquisitions in the past eight years. The acquisition will boost earnings with cost savings expected by the second full year of ownership, it said.

``This is the only offer the board has given me the ability to talk about, so we would see no reason why it would change, we think it's a good one,'' GrainCorp Managing Director Mark Irwin said in a phone interview. ``We do think that we will, over the next two years, do at least one other acquisition.''

Combined Group

GrainCorp already has 19 percent of Ridley stock through pre-bid acceptance arrangements, it said.

``This is an unsolicited, conditional takeover offer by GrainCorp and we urge shareholders to take no action until the offer is reviewed in detail by the board,'' Ridley Chairman John Keniry said in a statement to the exchange.

The combined group will process as much as 2 million metric tons of grain a year, or about 20 percent of eastern Australia's domestic grain consumption, GrainCorp said. Its Allied Mills unit currently processes about 1 million tons, GrainCorp's Irwin said.

Lazard Carnegie Wylie is advising GrainCorp, the statement said. Ridley hired Gresham Advisory Partners as advisers.

Ridley appointed Gresham and CIBC World Markets to manage the sale of its 69 percent-owned Canadian unit, Ridley Inc., the company said May 7. The unit agreed in February to pay C$6 million ($5.9 million) to settle a lawsuit by farmers who accused it of ignoring the risks of using animal parts before a case of mad-cow disease was found in Canada in 2003.

GrainCorp wants to look at Ridley's Canadian unit before deciding whether to sell it or not, Irwin said.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

Last Updated: May 16, 2008 04:03 EDT