UPDATE 1-Archer Daniels bids $2.8 bln for Graincorp

Sun Oct 21, 2012 7:28pm EDT
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* Potential for rival bidders given long list of suitors

* Bid undervalues Graincorp - analysts

SYDNEY Oct 22 (Reuters) - Archer Daniels Midland has bid A$2.68 billion ($2.77 billion) for Australian rival Graincorp, a 33 percent premium to the last traded share price, as the U.S agriculture giant seeks to push ahead in the global race for grains trading power.

Graincorp, which halted trading in its shares on Friday in anticipation of the takeover offer, said on Monday it was reviewing the A$11.75 a share bid, which is subject to a number of conditions including exclusivity and due diligence.

Analysts tracking Graincorp felt the bid undervalued the firm, based on past deals. With a potentially long list of rival bidders including Cargill, Bright Foods, Bunge, Wilmar and Louis Dreyfus, they expected the board to play hardball.

The bid comes at a time of consolidation in the global grains sector amid intense competition to feed fast-developing countries seeking food security.

Australia is a coveted market as the world's second-largest wheat exporter with a stable government and policy regime, yet some analysts who know Archer Daniels primarily as the top U.S. corn processor and a major producer of ethanol were surprised.

"Given the strategic value of the GrainCorp assets and this is the last remaining grain company in public ownership, we believe there could be other interested parties such as other grain related companies or an Asian buyer," Deutsche Bank analyst Mark Wilson said in a research note.

JPMorgan said in a note to clients that Graincorp should be valued at between A$11.88 to A$13.43 a share, based on Viterra's acquisition of ABB Grain in 2009.   Continued...