Archers Daniel Midlands’ bungled attempt to exit from its GrainCorp holding has resulted in a standoff with the market after it rebuffed yet another bid from Morgan Stanley priced at $8.08 a share.
The offer was tabled last week, according to sources, but met with a frosty reception.
As revealed by this column, Morgan Stanley has been among the more aggressive brokers seeking to capitalise on the disarray, pitching a bid of about $7.80 to ADM the day after the Lazard-led Dutch auction ran aground.
About six investors had agreed to take a substantial portion of the 19.9 per cent stake, including a large funds manager in Melbourne. When that initial opportunistic tilt failed to hit the target Morgan Stanley renewed its efforts but ADM has remained uninterested, and it’s understood the $8.08 bid represents the last tested price level. As one broker pointed out, the difficulty is that ADM offers no explanation as to why it rejects the offer, keeping the market in the dark about its desired exit price.
While it’s widely assumed the agribusiness giant is targeting a deal at close to $8.30, where GrainCorp’s shares closed yesterday, fund managers are demanding a discount given the mounting pressures on the group, including its ballooning debt burden and dwindling earnings from its marketing, storage and logistics divisions. Declining returns are already evident in these areas amid intensifying competition at each of GrainCorp’s major expert terminals.
Despite the flurry of activity from the market in the wake of the aborted sell-down late last month, there is now an expectation ADM will bide its time and let the noise subside.
In the meantime, brokers continue to plot a fresh attack even as investors become weary of betting against themselves.
The question now is whether ADM will beat Shell to the punch.
The energy giant’s recent decision to reclassify its remaining 13.6 per cent stake in Woodside fuelled expectations of an imminent sell-down. But the scale of the trade and the comparatively lacklustre performance of Woodside’s share price, which has fallen by 20 per cent in the past year, looks set to keep this deal on the backburner for some time yet.
Elsewhere, plans are proceeding apace for TPG Capital’s $1.5bn initial public offering of its poultry empire, Inghams Enterprises. Prospective investors in the float were ushered through a number of its chicken production facilities in South Australia last week by the company’s top brass, although the visitors were under strict instructions not to take any photos.
Yet the company will soon face the glare of publicity. Six banks have been charged with guiding Inghams into public ownership in October in a deal likely to mark a swan song for TPG’s Ben Gray.
By Gretchen Friemann and Bridget Carter
Source: The Australian
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