SYDNEY, AUSTRALIA — Archer Daniels Midland Company (ADM) announced on April 25 that it has signed a takeover bid implementation deed with GrainCorp Limited and begun due diligence on GrainCorp. 

Subject to the satisfactory completion of this due diligence, ADM has agreed to make a cash offer, which would be unanimously recommended by the GrainCorp board. 

If the ADM offer proceeds, and is successfully completed, shareholders will receive A$13.20 per share, comprising a cash payment of A$12.20 per share under the ADM offer and dividends totaling A$1. The dividends are expected to be fully franked, providing up to an additional A43¢ per share for those shareholders who can capture the full benefit from franking on the GrainCorp dividends.

GrainCorp previously rejected two bids from ADM, the first an offer of A$11.75 per share made in October 2012 and the second for A$12.20 per share made in December 2012. GrainCorp rejected both offers saying they materially undervalued the company.

In the event regulatory approvals are not achieved by Oct. 1, an additional fully franked dividend of A3.5¢ cents per share will be payable for each full month for the period between Oct. 1 and the date the regulatory conditions have been satisfied or waived, subject to GrainCorp being profitable over that relevant period.

Shareholders have also received a fully franked dividend of A35¢ per share since ADM’s initial approach was first announced on Oct. 22, 2012.

“We are pleased to have reached agreement with GrainCorp to conduct due diligence and, subject to that due diligence, put a recommended offer before GrainCorp’s shareholders,” said ADM Chairman and Chief Executive Officer (CEO) Patricia Woertz. “We anticipate that the offer will be cash accretive in the first full year and will meet our key financial objectives.

“GrainCorp is a leader in the Australian agribusiness sector. Should the offer proceed, the addition of GrainCorp to our global network would fit our strategy and help to further connect Australia’s growers with growing global demand for crops and food, particularly in Asia and the Middle East. ADM and GrainCorp have complementary geographies with little overlap and highly compatible cultures. We look forward to working with the GrainCorp team and Australian growers to build on their history of success.”

Key conditions to the ADM offer include: 
• 50.1% minimum acceptance;
• Regulatory approvals, including approval of the Foreign Investment Review Board and The Ministry of Commerce of the Government of the People’s Republic of China;
• No prescribed occurrences and various other standard restrictions for offers of this nature on the conduct of GrainCorp’s business during the ADM Offer period; and
• No material adverse change in respect of GrainCorp during the ADM Offer period. 

GrainCorp said it has agreed to certain exclusivity restrictions that prohibit it from soliciting, inviting or initiating any competing proposals and require GrainCorp to give ADM two days to match a superior proposal. 

A complete copy of the Implementation Deed, which includes further details of the confirmatory due diligence process, will be lodged separately.

The GrainCorp board believes that the ADM offer highlights the strategic value of our business and unique assets, the program of strategic initiatives being undertaken and GrainCorp’s enviable proximity to the fast growing Asian markets,” said Don Taylor, GrainCorp chairman. “GrainCorp will work with ADM to ensure that ADM’s confirmatory due diligence requirements can be satisfied, following which a takeover offer would be made on the terms agreed. 

“Assuming this is achieved, the GrainCorp board of directors intends to unanimously recommend the ADM offer subject to there being no superior proposal, an independent expert determining that the ADM offer is fair and reasonable and the relevant regulatory approvals being satisfied or waived by Dec. 31.”

The agreement permits ADM to undertake due diligence on GrainCorp for a seven-day period from April 25 to May 2. Subject to the satisfactory completion of this due diligence, ADM will announce whether the potential offer will proceed or the agreement will be terminated. The announcement will occur prior to the completion of ADM’s first-quarter earnings call, which has been rescheduled to begin May 1.

The potential offer would imply an aggregate transaction value of A$3.4 billion, including GrainCorp’s net debt. The transaction value reflects the weighted average cost of acquiring the initial 19.8% stake in GrainCorp at an average of A$11.24 per share and the outstanding shares of GrainCorp at A$12.20 per share. The transaction is expected to be cash accretive in the first full year and to meet ADM’s key financial objectives. Following successful completion of the due diligence process, ADM would provide additional details.

Barclays and Citi are acting as financial advisors. Corrs Chambers Westgarth and Cravath, Swaine & Moore LLP are acting as legal advisors.