GrainCorp Ltd. (GNC), the largest grain handler in eastern Australia, can best deliver shareholder value by pursuing a growth strategy rather than selling the company, Chief Executive Officer Alison Watkins said.
The Sydney-based company last week rebuffed a A$2.7 billion ($2.8 billion) offer from Archer-Daniels-Midland Co. (ADM), the world’s largest corn producer, saying the U.S. company’s A$11.75-a-share bid undervalued it.
“We’ve got a great strategy that we’re confident is going to be very appealing to our shareholders,” Watkins told the Australian Broadcasting Corp.’s Inside Business program yesterday.
Buying GrainCorp would give ADM control of seven of the eight bulk grain ports on the east of Australia, the world’s second-largest wheat exporter. GrainCorp handles about 75 percent of annual production on the nation’s east coast, it said last week.
GrainCorp’s board will respond to any proposal in the interests of shareholders, Watkins said Nov. 15, adding that the company isn’t in a “selling ourselves” mode. The door isn’t shut to a higher offer from ADM, said Tom Leske, a sales trader at Churchill Capital in Singapore.
GrainCorp closed at A$12.20 on Nov. 16, the day after it reported full-year earnings that missed analyst estimates. The stock has surged 38 percent since Oct. 18, the day before ADM disclosed it had a 14.9 percent stake and was seeking talks.
ADM’s eventual offer lodged Oct. 22 was 33 percent more than the Oct. 18 closing price. It remains an “attractive proposal,” the Decatur, Illinois-based suitor said last week.
Credit Suisse Group AG and Greenhill & Co Inc. (GHL) are advising GrainCorp while Barclays Plc and Citigroup Inc. are acting for ADM.
GrainCorp has identified A$110 million of profit improvements and expects increased demand from markets in Asia, the Middle East and North Africa, where it has a freight advantage and customers like its products, Watkins said yesterday.
The strategy details mean “shareholders have a really good current understanding of the fundamental value of GrainCorp,” she said. The company’s assets will be delivering value “for decades to come, and when you’re looking at agriculture you should have that time horizon in mind.”
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