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A rising tide lifts GrainCorp’s boat

GrainCorp Limited (ASX: GNC), Australia’s largest listed grain handler, has seen a 5% boost in its share price, after its Canadian competitor Viterra confirmed a buyout approach.

Viterra, which itself had taken over Australian company ABB Grain in 2009, has received a takeover offer, rumoured to be from newly-listed commodities trader Glencore, according to the Australian Financial Review.

The Viterra offer comes at a time when overseas buyers are becoming more active in the Australian ‘soft commodities’ markets with recent purchases by Chinese buyers of Australian sugar interests and the cornerstone stake Wilmar International, of Singapore, has taken in Australasian food maker Goodman Fielder (ASX: GFF).

Opinions vary as to the rationale for these purchases, but with food security likely to become more important in years to come, and food inflation likely to follow, canny international buyers are moving to shore up the front end of the food supply chain at opportunistic prices.

Recent comments from the Federal government’s Department of Agriculture, Fisheries and Forestry Deputy Secretary Phillip Glyde provide a glimpse of what may be motivating purchasers. Glyde said “Global population growth and rising incomes, particularly in middle income developing countries, are expected to lead to increased global food demand in the longer term”.

With few local listed commodity players remaining on the ASX, speculation has turned to the likes of GrainCorp and Goodman Fielder as potential takeover candidates, with the Viterra offer providing a pricing framework for the former, and the possible move to full ownership by Wilmar supporting the latter.

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Scott Phillips is a Motley Fool investment analyst. You can follow him on Twitter @TMFGilla. The Motley Fool’s purpose is to educate, amuse and enrich investors.This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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