The best performer on the ASX 200 on Monday has been the GrainCorp Ltd (ASX: GNC) share price.
In morning trade the grain producer's shares are up a remarkable 27% to $9.25 following the receipt of a non-binding takeover offer.
What has been offered?
This morning GrainCorp revealed that it has received a non-binding, indicative proposal from Long-Term Asset Partners expressing interest in a transaction which could result in a change of control.
The proposal involves an acquisition, via a scheme of arrangement, of 100% of the shares in GrainCorp for a cash consideration of $10.42 per share. This offer represents a 42.7% premium over its last close price of $7.30 and values the company at $2.4 billion.
Long-Term Asset Partners is a new asset manager for a trust whose beneficiaries are Australian investors.
According to the release, the structure has been established to make long-term investments and that it does not intend to sell any of the assets of GrainCorp should the proposal be recommended by the GrainCorp Board and supported by shareholders as a scheme of arrangement.
The proposal is "subject to a number of conditions and involves a complex financing structure with significant leverage comprising $3.2 billion in acquisition facilities from Goldman Sachs and $400 million from Westbourne Capital."
The GrainCorp board will now engage with the asset manager and assess the merits of the proposal, including the value offered compared to other value creation alternatives and strategies available to it.
At this point it has not formed a view on whether the price offered is recommendable and has warned that there is no certainty that the proposal will result in a binding proposal for GrainCorp.
What now?
If this proposal goes ahead then I think it will be a good result for shareholders.
But as there are a lot of hurdles for the proposal to overcome before a deal can be done, I think it could be worth considering taking profit today and focusing elsewhere in the sector at consumer staples shares such as A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL).
