* ADM offers A$12.20/shr vs prior bid at A$11.75/shr
* ADM hikes stake to 19.9 pct, making rival bid difficult
* Offer also includes 35 cps dividend announced in Nov
* GrainCorp shares up 3 pct; says to respond in due course
* GrainCorp seen holding out for higher price
By Colin Packham and Martinne Geller
SYDNEY/NEW YORK, Dec 4 U.S. 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
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.
GrainCorp's earnings are forecast to slide as Australia's
grains harvest retreats from record levels due to dry weather in
key growing areas.
Still, the new offer was below the average acquisition
multiple for Australian and global agribusinesses based on
forward earnings, said Belinda Moore, an analyst at RBS Morgans.
"We recommend shareholders hold on for a potentially higher
offer," Moore said in a note, arguing GrainCorp could be worth
up to A$14.33 based on recent transactions.
ADM said the new proposal reflected the value of GrainCorp's
business, taking into account its 2012 results, new initiatives
and a dividend announced on Nov. 15.
Including that final dividend of 35 cents per share, ADM
said its new offer was worth A$12.55 per share.
ADM revealed it had acquired an additional 5 percent of
GrainCorp for the new offer price, raising its stake to 19.9
percent - the limit under Australian takeover laws before it
must make a bid for the entire company.
"The 19.90 percent stake puts ADM in a good spot. If it can't
achieve full control this time, it can wait for a poor harvest
year for GrainCorp to mop up the remaining shares," said BBY's
The increased shareholding was seen making it difficult for
rival bidders to enter the fray.
Among a long list of potential rival bidders identified by
analysts are Cargill and Louis Dreyfus -- two of the
four "ABCD" firms (ADM, Bunge, Cargill and Louis Dreyfus)
that have dominated the global agricultural business for
Other possible bidders include Singapore's Wilmar
International, China's Bright Food Group
"We can't rule (other bidders) out - agriculture assets are
very valuable around the globe. But this makes it very difficult
for anyone to compete," said Michael McCarthy, chief market
strategist at CMC Markets.
ADM shares rose 0.3 percent to $26.79 in New York trade on