On 3rd November 2018, GrainCorp Limited (ASX: GNC) announced that it has received a non-binding, indicative proposal from Long-Term Asset Partners Pty Ltd (LTAP) which involves a proposal regarding an acquisition, through a scheme of arrangement, of 100 percent of the shares in GrainCorp for cash consideration of $10.42 per share. Following the release of this news, the share price of the company increased by 26.644 percent as on 3 November 2018.
As per the Directors of LTAP, LTAP is an asset manager for a trust whose beneficiaries are Australian investors, and the structure of the company allows it to make long-term investments. The board of the company has also informed that they are not planning to sell any of the assets of GrainCorp if the LTAP Proposal is accepted.
As per the GrainCorp Limited’s announcement, the board of GrainCorp will be engaging with LTAP with regards to the ongoing Portfolio Review to assess further the Plus points of the LTAP Proposal, including the value offered compared to other value creation alternatives and strategies available to GrainCorp.
As of the now, the board has not fully evaluated the proposal hence the proposal is not yet sufficiently certain or in a form which would allow GrainCorp's Directors to make a recommendation to shareholders. The GrainCorp’s Board has noted that the proposal is dependent on various conditions which involve a complex financing structure with significant leverage comprising $3.2bn in acquisition facilities from Goldman Sachs and $400 Mn from Westbourne Capital.
As per the announcement, it is not certain that the proposal will be recommended by the Board of GrainCorp. Further, the proposal is dependent on due diligence which will be provided once appropriate confidentiality and standstill arrangements have been taken place including customary protections for GrainCorp.
The GrainCorp’s Board has not yet decided that whether the price offered under the LTAP Proposal is sufficient enough to recommend it to shareholders and they also requires more information on the identity of the equity investors underpinning the LTAP Proposal as well as the longer-term financing plan and intentions for the business. The board is planning to further assess the effects of the LTAP Proposal on all of GrainCorp’s stakeholders which includes shareholders, grower-customers, trading partners and its people.
Earlier GrainCorp Limited has announced that they are in the process of evaluation of company’s capital management and portfolio optimization opportunities and this process involves an assessment of GrainCorp’s business portfolio to develop and implement strategies to unlock and create improved value for shareholders. The company is currently reviewing their portfolio, and it has contemplated various potential value creation strategies including operating strategy and will take some time to complete.
In the last six months, the share price of GrainCorp decreased by 6.77 percent as on 30 November 2018. GNC’s shares traded at $9.245 with a market capitalization of circa $1.67 billion as on 3 December 2018 (AEST 2:02 PM).