Tuesday, March 13, 2012

Merger Action Down Under? Another Major Grain Handler in Play

Following up on yesterday's "Grain Handler Viterra gets Takeover bid from Glencore, report says (VT.tsx; GLEN.L)" and last week's "Glencore, Bunge Eye Sale of Soros-backed Gavilon" we have another potential target, this time antipodean.
From the Wall Street Journal's Deal Journal Australia blog:

GrainCorp Next in Grain Consolidation Wave?
Possible industry consolidation encouraged Australia’s largest grain handler GrainCorp to jump 8.6% to A$8.80 a share in early trade Monday after Canadian agribusiness Viterra disclosed Friday it has received “expressions of interest” from unidentified third parties....MORE

From The West Australian:
GrainCorp jumps on takeover speculation
GrainCorp jumps on takeover speculation

...Although GrainCorp chief executive Alison Watkins has dismissed suggestions her company was vulnerable to a takeover, RBS Morgans analyst Belinda Moore said the grain handler was likely to attract the attention of global players given it was the last "significant" grain company capable of being taken over in Australia.

In terms of size, GrainCorp is on par with that of WA's CBH Group, however CBH is essentially shielded from takeover thanks to its co-operative structure.
Based on a takeover multiple of 10 times enterprise value/earnings - applied to previous transactions involving similar agribusinesses in the US - Ms Moore said GrainCorp could attract up to $16.56 a share, valuing the company at $3.28 billion.

The latest manoeuvrings come 18 months after GrainCorp sought to merge with listed rival AWB in a bid to bolster its defence against the arrival of foreign players in a deregulation market in Australia. GrainCorp lost out to a $1.2 billion cash bid for AWB from Canada's Agrium.

Any foreign takeover of Viterra would require approval from the Canadian government, which quashed BHP Billiton's bid for PotashCorp last year.