ADM ups pressure on Australia's GrainCorp with $2.9 bn bid

US agribusiness giant Archer Daniels Midland Co tightened its grip on GrainCorp Ltd, hiking its bid to $2.9 billion and buying more shares, but may need to offer more to win over Australia's last major independent grains handler.

Australian grains, food and agricultural businesses have been snapped up by large global players in recent years, part of a global consolidation amid intense competition to feed fast-developing countries seeking food security.

GrainCorp is the last available independent asset of scale in Australia, the world's second-largest wheat exporter and an attractive market due to stable policies and good links to Asia. ADM, which is looking to increase its geographical spread, upped its offer by 3.8 percent from A$11.75 per share to A$12.20 per share in cash -- a 40 percent premium to GrainCorp's share price at the time of the initial offer.

The new proposal sent GrainCorp shares up 3 percent to A$12.32, suggesting investors may hold out for a higher offer.

"The current offer should open the way for ADM to engage with Graincorp's board," Dennis Hulme, senior analyst at BBY Ltd, suggesting the bid could be sweetened for shareholders

through a special dividend.

"There has been speculation that GrainCorp is seeking over A$13 a share but with no competing bidders and the passage of time that looks less likely. I believe a A$12.50 share offer, which includes a special dividend would be a good outcome for

shareholders."

Strategic assets

GrainCorp noted the "revised, non-binding and conditional proposal" and said it would advise the market in due course, while again highlighting its portfolio of strategic assets.

GrainCorp operates seven of the eight bulk grain elevators in eastern Australia, handling as much as 60 percent of the region's wheat, barley, canola, chickpea and sorghum crops.

GrainCorp, which took in 12.2 million tonnes of grain last season, rejected ADM's earlier $2.8 billion bid, saying it undervalued the company after a bumper harvest delivered a record annual net profit.

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