Little-known asset manager makes $1.8 billion bid for Australia's GrainCorp

SYDNEY (Reuters) - Australia’s largest listed bulk grain handler GrainCorp Ltd said on Monday it received an unsolicited A$2.38 billion ($1.8 billion) takeover approach from a little-known asset manager, catapulting its shares nearly a third higher.

FILE PHOTO: The logo for GrainCorp, Australia's largest listed bulk grain handler, adorns a sign at the Burren Junction depot located in the New South Wales town of Burren Junction, located north-west of Sydney in Australia, March 15, 2017. REUTERS/David Gray

GrainCorp said privately held Long-Term Asset Partners (LTAP) made an all-cash approach of A$10.42 a share, a near-43 percent premium to the stock’s closing price on Friday. Confirming the approach, LTAP said it was an asset manager for a trust whose beneficiaries were Australian investors.

Shares in GrainCorp recorded their biggest one-day move in five years, jumping 27 percent by 0400 GMT to A$9.28. But that was still well below the indicative offer price, reflecting uncertainty among investors on whether a deal would go ahead.

The approach comes as a drought wilts crops across Australia’s east coast, limiting GrainCorp’s ability to earn revenue from international grain trading.

“The timing of the offer is opportunistic,” said Belinda Moore, an equity analyst at RBS Morgans.

“With the next opportunity for GrainCorp to possibly benefit from materially improved conditions not until 2021, shareholders will likely see this offer as attractive.”

GrainCorp said it would consider the proposal but needed to know more about the financial backers of LTAP and its plans for the target. LTAP did not disclose details of its financial resources.

GrainCorp said it was told by LTAP that the asset manager has four local directors, including Lance Hockridge, a director of Huawei Australia.

The subsidiary of Chinese telecoms equipment maker Huawei Technologies Co Ltd [HWT.UL] was effectively barred in August from participating in the construction of Australia’s fifth-generation (5G) telecommunications network on security grounds.

GrainCorp also noted the “complex financing structure” of the deal involving A$3.2 billion in acquisition facilities from Goldman Sachs Group Inc and A$400 million from Westbourne Capital Pty Ltd.

Analysts said the identity of LTAP’s financial backers, however, would be a key determinant in the success of the bid. Australian takeover law means the deal will draw the attention of regulators, and should it transpire that LTAP has foreign backers, it will face additional obstacles.

Australia’s conservative government must return to the polls in less than six months, and will need to win support from its traditional electoral base - rural voters, many of whom will likely have concerns about a sale of GrainCorp.

“Growers will want to know who is behind the bid and what their intentions are but whoever they are, they are going to want a return on their investment. Growers aren’t keen on paying a cent more,” said Dan Cooper, a farmer in Caragabal, New South Wales, about 400 km (250 miles) west of Sydney.

The government blocked a A$2.8 billion takeover of GrainCorp by U.S. agribusiness giant Archer Daniels Midland Co in 2013 following pressure from grain growers.

In what analysts said would likely win favor with farmers, GrainCorp said LTAP did not intend to sell any GrainCorp assets should the takeover succeed.

(This story corrects name of Huawei Australia director in eighth paragraph to Lance Hockridge, not Tony Shepherd)

Reporting by Colin Packham; Additional reporting Devika Syamnath in BENGALURU; Editing by Stephen Coates and Christopher Cushing