The ambitious new outfit behind the latest $2.4 billion bid for agribusiness giant, GrainCorp, is assuring farmers it has their long-term interests at heart and no plans to on-sell the business to any other parties.
The newly formed Long-Term Asset Partners, led by heavyweight Australian business executives with links to the infrastructure sector, claims it began developing the takeover bid three years ago.
On Monday GrainCorp confirmed LTAP last month presented a non-binding scheme of arrangement plan to pay $10.42 each for all the company’s shares, and to subsequently de-list the 101-year-old grain marketing processing and logistics business from the stock market.
The private equity offer represented a 43 per cent premium on GrainCorp’s $.7.30 drought-battered share price of last Friday.
GrainCorp shares have since rocketed to highs around $9.30, dipping mid-week to $9.13.
Directors are yet to decide about the offer, especially as it comes as they are reviewing their total business portfolio, which has, in turn, has prompted speculation about acquisitions and a new capital structure on GrainCorp’s own boardroom agenda.
LTAP is taking a very long term approach to the GrainCorp business and the business of agriculture,”
Shareholders were urged to do nothing at this stage.
GrainCorp said limited information about LTAP's backers and its "complex financing structure" made it difficult to fully assess the situation.
Key players heading the bid include former chairman of Transfield Services and Melbourne motorway, EastConnect, Tony Shepherd; Aurizon rail boss, Lance Hockridge; former banker and grain analyst, Chris Craddock, and Nigel Hart, the former global ports director with US crop commodities and processing giant, Archer Daniels Midland (ADM).
In late 2013 a contentious year-long $3b bid for GrainCorp by ADM was blocked by the federal government which declared it not in the national interest.
Mr Hart, also a past GrainCorp company secretary and logistics boss, joined LTAP as a special adviser two years ago.
“This vehicle (LTAP) is taking a very long term approach to the GrainCorp business and the business of agriculture,” Mr Hart said.
Listed agribusinesses, particularly grain companies, were often disadvantaged when business momentum and strategic ambitions were disrupted by, and exposed to, performance pressure on share traders or market fluctuations.
“In the private environment you don’t get that distraction, or the conflicting pressures and short term shareholder reactions which can impact on your business agenda,” Mr Hart said.
“What growers are looking for in a business relationship with a company like GrainCorp are long term commitments.
“We intend to engage with them and convince them we’re very much talking about the same sort of priorities they require in their farm businesses and in the relationships they have with the critical players they relying on for profitability.”
He said GrainCorp, via its century-old heritage, enjoyed critical trading relationships with the farm sector every day.
“For that reason farmers want a competitive service provider with a five-, 10- or 15-year horizon on issues like infrastructure and costs which they can work with when planning their own business.”
LTAP executives have promised to engage broadly with graingrowers once early formalities of the bid process are nailed down with GrainCorp management.
They have also insisted there is “no intention to sell the business”.
The mandate for LTAP was to “buy and hold GrainCorp”.
“It’s a too early in the process to be confirming a wholesale tour, but we have to go face to face with farmers, explain what we’re about and have some robust dialogue,” said Sydney-based Mr Hart, originally from Junee in southern NSW.
He has held initial talks explaining the bid objectives with peak grain industry bodies Grain Producers Australia and Grain Growers, and planned direct contact with NSW Farmers, AgForce and Victorian Farmers Federation officials.
We’ll continue adding value to growers’ grain through grain marketing services and oilseed and malt processing for domestic and international consumers.”
If successful, LTAP’s move on GrainCorp – Australia’s biggest listed agribusiness – would be its first business acquisition.
It already owns a modest 4.2pc of the east coast business, but has declined to be too specific about how its strategy will be financed or provide much detail of the key players in the background.
The bidding group describes itself as an asset manager for a trust representing more than $7b in funds under management for Australian investors.
It would manage the GrainCorp purchase, initially backed by a $3.2b loan from Goldman Sachs, plus $400 million from Melbourne and UK-based investment fund Westbourne Capital.
"If the bid were successful, LTAP is confident there is sufficient commitment from future Australian investors,” said chairman, Mr Shepherd.
“GrainCorp shareholders will have the opportunity to receive an immediate cash payment at a price we believe represents a very attractive value for the company.
“For growers, an acquisition by LTAP ensures ownership and control by an Australian-owned entity with a plan for the long term development of GrainCorp’s assets and operations and, importantly, an optimistic view of future volume growth for Australian growers.
“We’ll continue adding value to growers’ grain through grain marketing services and oilseed and malt processing for domestic and international consumers.”
LTAP’s capital structure would allow for significant future capital expenditure to enable growth for all stakeholders.
Agribusiness analyst with stock broker Morgans, Belinda Moore, described the bid for GrainCorp as “opportunistic timing” given the company’s earnings were being hammered by the worst drought in decades in many areas.
“Since the ADM days there has been continued speculation about who would be next to make a move, given the company’s asset value against its restrained share price performance,” she said.
“This is far from a done deal – it ‘s sure to play out for some months.
“We can’t rule out interest from other parties given the scale and strategic nature of its assets and the fact that it is the last remaining significant grain company capable of being taken over in Australia.”
The bidding group has emphasised LTPA was not to be confused with the typical view of a private equity investors who invariably had short term expansion agendas which also involved selling off assets.
Retention of GrainCorp’s international businesses such as its trading and malt processing division would be “paramount” to the company’s success.
Mr Hart LTAP’s management had a depth of skills particularly in transport, supply chains and infrastructure which had great continuity with GrainCorp’s business and its own workforce skills.
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