Australian investors make A$2.4bn bid for agribusiness giant GrainCorp

Australian agribusiness giant GrainCorp has received a non-binding indicative offer from a little-known asset manager called Long-Term Asset Partners, the former announced to the ASX today.

The LTAP proposal would see it acquire 100 percent of GrainCorp’s shares, via a scheme of arrangement, for a cash consideration of A$10.42 ($7.69; €6.76) per share. The offer values GrainCrop at approximately A$2.4 billion.

The offer represents a premium of 23 percent to GrainCorp’s last trading price before the offer was made public of A$7.30. LTAP’s offer was first made on November 12, according to Australian media reports.

GrainCorp said in its statement to the ASX that LTAP is an “asset manager for a trust whose beneficiaries are Australian investors”. It is not clear who those investors are and what level of assets LTAP is managing but, if approved, the purchase of GrainCorp would be its first acquisition.

The proposal involves a “complex financing structure” with leverage comprising A$3.2 billion in acquisition facilities from Goldman Sachs and A$400 million from infrastructure debt specialists Westbourne Capital.

GrainCorp added that LTAP had been formed to make long-term investments and that it did not intend to sell any GrainCorp assets should the offer be successful.

GrainCorp said its board had not yet formed a view on whether to recommend shareholders accept LTAP’s proposal and that it required additional information on the identity of the investors behind LTAP as well the longer-term financing plan and intentions for the business before it could do so.

Westbourne Capital declined to comment on the identity of the investors behind LTAP or any other aspects of the deal. Goldman Sachs could not be reached for comment.

LTAP’s directors have extensive connections to infrastructure and logistics, which, coupled with GrainCorp’s extensive network of grain storage terminals and ports and the involvement of Westbourne Capital, suggests the investors view the acquisition as an infrastructure play.

Tony Shepherd is the fund manager’s chairman, with other directors including Lance Hockridge, Andrea Staines and Chris Craddock. Craddock has been managing director of LTAP since April 2016, according to his LinkedIn profile.

Shepherd has had a long career in Australian infrastructure and is currently chairman of Macquarie Specialized Asset Management, which is the manager of several of Macquarie’s unlisted funds, including its Global Infrastructure Funds. Macquarie is not involved as an investor, Infrastructure Investor understands.

Shepherd is also chairman of WestConnex Delivery Authority, the organization tasked with delivering Australia’s largest infrastructure project, and previously oversaw the listing of Transurban, Transfield Services and Connect East.

Hockridge was managing director and CEO of rail freight operator Aurizon until November 2016 and is currently a non-executive director at Huawei Technologies (Australia). He was formerly managing director of Queensland Rail. Staines has also held numerous non-executive roles at infrastructure and logistics businesses in recent years, including fund manager QIC, Gladstone Ports Corporation, Australian Rail Track Corporation, and Aurizon. She currently holds non-executive roles at Freightways and Sealink Travel, among other organizations, according to her LinkedIn profile.

Neither LTAP nor its directors could be reached for comment.

GrainCorp is in the middle of a portfolio review that has been ongoing for much of 2018 and will continue despite the announcement of LTAP’s offer.

The review has included, among other things, an evaluation of: value-maximizing options for GrainCorp’s bulk liquid storage infrastructure assets; value-maximizing options for its global assets through “participating in ongoing industry consolidation” or through ownership separation of those assets; and simplifying its Eastern Australian grains operating structure.

An update on the progress of the portfolio review is scheduled for the company’s AGM in February 2019.

GrainCorp announced last month that its group earnings had been negatively impacted by a significantly smaller crop due to drought conditions in Eastern Australia. Total group revenue to 30 June 2018 fell to A$4.253 billion from $4.576 billion for the full year in 2017, with EBITDA falling from A$390 million to A$269 million over the same period.