COMMODITIES GIANT GLENCORE TO PLACE TAKEOVER BID FOR GRAINCORP AT AROUND $5.2BILLION

IS GLENCORE GOING TO SWALLOW UP GRAINCORP AT AROUND $5 B?

GRAINCORP shares jumped on speculation it may become the next takeover target after weekend reports that commodities giant Glencore is bidding about $5.2 billion for Canadian rival Viterra.

Shares of Graincorp rose as much as 70 cents, or 8.6 per cent, to $8.80 before easing back to $8.49 in recent trading.

RBS Morgans agribusiness analyst Belinda Moore said continuing consolidation in the global grains sector “should focus investor’s minds around what Graincorp is worth under a takeover scenario.

“Given the scale and strategic nature of GNC’s assets and the fact that it is the last remaining significant grain company capable of being taken over in Australia, we expect a number of parties could also be interested in Graincorp at some point in the future.”

London’s Sunday Telegraph reported that Glencore, currently pursuing a $US90 billion merger with diversified miner Xstrata plc, was bidding for Viterra, which on Friday (Canadian time) confirmed it had received an expression of interest from a third party.

Viterra bought Australia’s ABB Grain in 2009 for about $1.6 billion.

Viterra’s Australian-listed shares shot up $2.67, or 26 per cent today, to $13.02. Viterra’s Canadian-listed shares rose 24 per cent on Friday to close at $C13.58, giving the company a market cap of $C5.05 billion.

The Wall Street Journal is reporting that Cargill may also make a tilt at Viterra, according to Bloomberg.

RBS’s Ms Moore said past North American agribusiness takeover deals were priced on average at a 1o times earnings multiple – the enterprise value over the earnings before interest tax depreciation and amortisation – while previous takeover multiples for Australian agribusinesses were about nine times earnings.

On those multiples, Ms Moore estimated Graincorp could be worth between $14.75 – $16.56 a share, using forecast earnings for 2011-12.

The move on Viterra comes as Canada prepares to deregulate grain marketing in August, with the Canadian Wheat Board set to lose its monopoly.

Sourced & published by Henry Sapiecha

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