GNC - Graincorp Limited

[prawn_86]

2.8billion dollar takeover offer for Graincorp from US Agricultural co Archer Daniels Midland (ADM). THis is on the back of ADM buying 19.8% worth in a couple trades late last week

 

[herzy]

Offer price is 11.75 (ish). Why has sp jumped to 12.40?

 

[rcm617]

The market is expecting additional offers for Graincorp or GNC to negotiate a better deal for shareholders.

 

[chops_a_must]

Still looks like a good target to me.

Not much discussion on ag stocks.

Why not?

 

[chops_a_must]

Well.

They've accepted the takeover at a premium. It looks like a good result to me.

12.20 for the shares and another $1 fully franked dividend.

Holding.

 

[coolcup]

Well.

They've accepted the takeover at a premium. It looks like a good result to me.

12.20 for the shares and another $1 fully franked dividend.

Holding.

Is there any risk around the due diligence the bidder needs to do or getting FIRB and the Chinese Chamber of Commerce approval? Just wondering why it is trading so far below the bid price!!

 

[chops_a_must]

Is there any risk around the due diligence the bidder needs to do or getting FIRB and the Chinese Chamber of Commerce approval? Just wondering why it is trading so far below the bid price!!

I wouldn't have thought so.

But there is a time premium risk, which explains the price differential I imagine.

Not much point reading much into the price action todau. Pretty low volume.

 

[skyQuake]

It'll take about 10 months to finalize everything.

Main issue is China's approval (for GNC's china assets). The relevant department took a year to give approval of Glencore/Xstrata.

3%pa -> 2.5% for 10m = 1.025%*12.85 -> $13.17



Go get that 3c of value!

 

[coolcup]

It'll take about 10 months to finalize everything.

Main issue is China's approval (for GNC's china assets). The relevant department took a year to give approval of Glencore/Xstrata.

3%pa -> 2.5% for 10m = 1.025%*12.85 -> $13.17



Go get that 3c of value!

My understanding is that they pay a fully franked 3.5 cents for every month it takes for the proposal to get approval beyond October 2013. My back of the envelope says that the IRR if it takes till February to finalise is 9.2% including the franking credits. I think that is a bit better than what you have indicated above.

 

[chops_a_must]

My understanding is that they pay a fully franked 3.5 cents for every month it takes for the proposal to get approval beyond October 2013. My back of the envelope says that the IRR if it takes till February to finalise is 9.2% including the franking credits. I think that is a bit better than what you have indicated above.

It is. But there is still a margin of risk.

You'll find that depending on how it is looking, arbitragers will begin to close the gap., and take out the risk.
And if it moves to an almost certainty, it will trade above 13.20.

 

[coolcup]

It is. But there is still a margin of risk.

You'll find that depending on how it is looking, arbitragers will begin to close the gap., and take out the risk.
And if it moves to an almost certainty, it will trade above 13.20.

I agree. One is time risk you spoke of earlier. The other is the deal risk. The 7 day period of DD seems pretty short, so that shouldn't pose much of a risk. The key thing is FIRB (does Australia feel it is too strategic an asset to sell) and the Chinese Chamber of Commerce (no idea what they will think).

Any views?

 

[Zedd]

Any thoughts on whether the buyout will go ahead? The market certainly seems to be getting more and more wary given the talk in the news, and the Nationals being completely against it.

Personally I'd love to see the deal fail and the share price plummet cause I'd love to get back into this company for a long-term hold.

Recent international buyouts though appear to go through, regardless of how much anti-foreign ownership sentiment there is. Anyone remember when the last deal was knocked back due to foreign investment concerns from the US?

 

[DJG]

Does anybody know why GNC paid so much tax in 2012 compared to 2011?

 

[skc]

Does anybody know why GNC paid so much tax in 2012 compared to 2011?
View attachment 54177

You are looking at the cashflow statement which may be affected by timing of tax payments.

How do these numbers compare with the tax expense on the P&L?

Another potential reason would be exceptional one-off items... may be a writedown in 2011 or some exceptional gain in 2012 (e.g. asset sale). You will have to dig through the reports to find them.

 

[DJG]

I'm currently doing it at university and all though my group got close we couldn't seem to get close enough. Most likely its a variety of things.
We're analysing GrainCorp and doing as you said, getting rid of one-off, non-recurring events.

Already dug through most of the report. Not even the deferred assets/liabilities were close.

 

[notting]

That is one of the worst decisions I think I have ever seen.
Deal off.
This is totally political, made to subdue paranoid farmers hence boost buffoon national/country party.
This thing will never be worth what was offered.
Hardy makes his first big move, fat moron. (as in Laurel and Hardy)
International instos will be well pissed!
I don't own it.
Will short the crap out of it if it opens anything higher than it's trading price prior to bid.

 

[skc]

That is one of the worst decisions I think I have ever seen.
Deal off.
This is totally political, made to subdue paranoid farmers hence boost buffoon national/country party.
This thing will never be worth what was offered.
Hardy makes his first big move, fat moron. (as in Laurel and Hardy)
International instos will be well pissed!
I don't own it.
Will short the crap out of it if it opens anything higher than it's trading price prior to bid.

I am ok with the decision. Hockey's job is not about maximising return for shareholder value. So whether the bid is made at an over inflated price is irrelevant.

There's something about agriculture and politics and corruption that just seem to go together more often than not...

 

[coolcup]

That is one of the worst decisions I think I have ever seen.
Deal off.
This is totally political, made to subdue paranoid farmers hence boost buffoon national/country party.
This thing will never be worth what was offered.
Hardy makes his first big move, fat moron. (as in Laurel and Hardy)
International instos will be well pissed!
I don't own it.
Will short the crap out of it if it opens anything higher than it's trading price prior to bid.

I think the whole register is hedge funds now pretty much right? They will be shorting right alongside you!

 

[notting]

There's something about agriculture and politics and corruption that just seem to go together more often than not...

Wouldn't matter cause they would have sold it back to us in five years time for half the price because there are no budget aliens to work the farm!

 

[Whiskers]

That is one of the worst decisions I think I have ever seen.
Deal off.
This is totally political, made to subdue paranoid farmers hence boost buffoon national/country party.
This thing will never be worth what was offered.
Hardy makes his first big move, fat moron. (as in Laurel and Hardy)
International instos will be well pissed!
I don't own it.
Will short the crap out of it if it opens anything higher than it's trading price prior to bid.

As it turns out I also think Hockey did make the decision purely on a political basis because the Nationals, or more particularly so many of their supporters are so against the deal. Warren Truss speaking out again yesterday against the deal, on top of Joyce and quite a number of coalition members in grain growing areas regularly speaking out against it was probably the straw that broke the camels back so to speak.

I am ok with the decision. Hockey's job is not about maximising return for shareholder value. So whether the bid is made at an over inflated price is irrelevant.

There's something about agriculture and politics and corruption that just seem to go together more often than not...

I believe he made the correct decision (against his original intentions) for the future of Aus agriculture and the economy. Too often the boards of our companies are infiltrated by investors and or directors whose aim is to facilitate a takeover or other business re-arrangements not in the best interest of shareholders or the national interest.

From my experience the agricultural industry in Aus does not escape corruption issues, but I'm thinking the whole ADM takeover was tending to be more corrupt'ish to increase the prevalence of monopolies.

A bit of a kick in the knee occasionally for multinationals like ADM won't hurt our foreign investment prospects, but should send a message we are not a push over for corrupt monopolies.

What's needed now is a board shakeup to focus on utilising it's resources more efficiently.