This is from Business WITH THE WALL STREET JOURNAL DATE 18 -5-2011 GRAINCORP chief executive Alison Watkins' $856 million play for AWB may have failed last year, but that doesn't mean the company can't be part of the M&A craze that's swept through Australia's agricultural sector. GrainCorp, which is one of a few remaining listed agricultural assets in the Australian market, is thought to be working with Credit Suisse amid interest from offshore rivals.
The Macquarie-advised Canadian group Viterra, which in 2009 splashed $1.6 billion on South Australia's grains handler, ABB, is a logical acquire of GrainCorp, which has a network of about 280 country grain-storage sites and seven grain and two non-grain export terminals.
Viterra has a watching brief on GrainCorp, which is searching for bolt-on acquisitions as part of a broader strategic plan to lift revenue, expand its existing operations to include higher-margin products and services and increase its leverage to emerging economies. Viterra is believed to be keen to do the deal at some stage. And as the Canadian group completes the integration of ABB, there's increasing chatter that GrainCorp, which expects to collect a record 14.5 million tonnes of grain this year and is forecast to do even better in 2012, is next on its to-do list.
Citigroup has a $10.00 -$11.90- a-share valuation on GrainCorp -- which closed at $7.64 yesterday -- under a takeover scenario, based on the 9.1-times average forward enterprise value to earnings before interest, tax, depreciation and amortisation multiple paid for local agricultural assets over a couple of years. For example, Canadian fertiliser giant Agrium bought AWB for $1.2bn at 8.8 times forward earnings.
GNC Price at posting:
$7.93 Sentiment: Hold Disclosure: Held
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