Well that’s that! The last of Australia’s major grain marketers and handlers looks set to be sold off to a foreign entity.
Graincorp (ASX: GNC), which was first approached by Canadian firm Archer Daniels Midland (ADM) in October last year, has signed a conditional agreement priced at $13.20 per share. It was a case of third time lucky for AMD whose first offer was pitched at $11.75. To the Graincorp Board’s credit, they have done well to extract a further $1.45 in value for shareholders.
Graincorp holds a number of strategic assets. These include the largest grain storage infrastructure network in Eastern Australia and grain processing assets which produce around 35% of Australia’s malt, 40% of domestically produced canola oil and 35% of Australia’s flour. With ABB Ltd and AWB Ltd no longer Aussie-owned, the investment universe for direct-listed exposure to soft commodities has diminished, particularly for grains which are one of Australia’s largest agricultural export commodities.
Investors wanting to invest in the “food bowl” theme still have some options. These include investing in beef cattle farming through the Australian Agricultural Company (ASX: AAC), the seafood industry through Tassal (ASX: TGR) and Select Harvests (ASX: SHV), which grows and processes almonds and related products.
An interesting thing about investing is that for every share traded there is a buyer and a seller. In theory at least this means one side thinks the company is overpriced or not an attractive investment and the other side of the trade thinks the company is under-priced and has potential that is presumably equal too or greater than other alternatives, such as buying the index.
Of course only one of these two investors can be right. Time will tell whether Australians have sold off their grain assets and maximised their wealth in doing so, or if the foreign buyers have had a more insightful view of our grain assets and ultimately bank the benefits.
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