LTAP calls off $1.7 billion bid for GrainCorp Limited, shares tumble

In December, GrainCorp had held back from recommending the deal to its shareholders due to lack of information.

GrainCorp, leading grain handler of Australia, has reportedly announced that fund manager Long-Term Asset Partners (LTAP) has retreated takeover bid worth A$2.4 billion ($1.7 billion) after due diligence, driving shares to five-month lows.

Reportedly, the stock of GrainCorp has dropped by 11% at the open trade on Tuesday to nearly hit where it stood preceding the bid, before it recovers some of the losses at A$8.18 to trade. The broader market has opened half a percentage point higher.

In December 2018, LTAP had made an offer worth A$10.42 per share to GrainCorp. The offer was made because crops across east coast of Australia were wilted by drought which restricted the ability of GrainCorp to earn revenue from international grain trading.

Tony Shepherd, Chairman, LTAP, reportedly stated that the company was confident about turning the proposal into a bidding offer as it was contemplated if due diligence had supported its operational assumptions.

According to reliable sources, now, the current growing season, which is predicted to be poor, will attract investor’s attention. The withdrawal of LTPA will raise concerns about outlook of GNC and the due diligence process.

Apparently, the share price of GNC was A$7.30 before LTAP’s proposal. The company’s outlook has deteriorated further and is now expected to report a loss in FY20.

In December, GrainCorp had held back from recommending the deal to its shareholders due to lack of information.

The splitting of GrainCorp into two businesses is under process. The company has plans to spin off and list its global malting unit and restructuring its grain business, cited sources.

GrainCorp reportedly noted last month that the company was engaging with suitors, including LTAP, vying for parts or whole company.

For the record, in 2013, the takeover of GrainCorp worth A$2.8 billion by Archer Daniels Midland Co, the U.S. agribusiness giant, had been blocked by Australian government after pressure from grain growers.

Source credit: https://www.reuters.com/article/us-graincorp-m-a-ltap/long-term-asset-partners-withdraws-takeover-bid-for-australias-graincorp-idUSKCN1SC0M5

http://www.graincorp.com.au/_literature_249429/Update_from_LTAP