GrainCorp share price on watch after LTAP withdraws takeover offer

The GrainCorp Ltd (ASX:GNC) share price could come under pressure today after LTAP withdrew its $10.42 cash per share takeover offer…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The GrainCorp Ltd (ASX: GNC) share price will be on watch on Tuesday after the integrated grain company released an update on the acquisition proposal it received from Long-Term Asset Partners.

What was in the update?

According to the release, GrainCorp has been informed by Long-Term Asset Partners (LTAP) that, following a period of due diligence, it is unable to proceed with its non-binding, indicative proposal to acquire the company for a cash consideration of $10.42 per share.

LTAP chairman, Tony Shepherd, explained that its due diligence didn't support its operational assumptions.

He said: "LTAP was a very serious bidder with significant Australian and international backing across the proposed transaction. Had due diligence supported our operational assumptions, we are confident we would have turned the LTAP proposal into a binding offer as contemplated. GrainCorp provides a valuable service to the nation's grain growers and we wish them well."

What now?

Whilst the breakdown in takeover talks could weigh heavily on Graincorp's shares, it is worth noting that the company has, in parallel, continued to progress its portfolio review to evaluate capital management and portfolio optimisation strategies.

Following this review the company announced plans to demerge its global malting business, subject to shareholder and other approvals.

Doing so will result in two independent ASX-listed companies and potentially unlock significant value for shareholders.

One company would be MaltCo, a global malting and craft brewing distribution business. It would be the world's fourth largest independent maltster with malting houses in the United States, Canada, Australia, and the United Kingdom. It also operates Country Malt Group, a leading craft malt distribution business in North America.

The other company would be New GrainCorp, a domestic and international grain handling, storage, trading and processing business focused on grains, oilseeds, pulses, edible oils and feeds.

GrainCorp's chairman, Graham Bradley, advised that the board "believes that the demerger would unlock significant value for shareholders by establishing two unique and high quality ASX-listed agribusinesses with focussed management teams able to pursue independent strategies and growth opportunities."

Should you invest?

Whilst I'm not overly interested in New GrainCorp, I do think that MaltCo would be an interesting investment option should the demerger go ahead.

This could make it worth considering an investment if GrainCorp's shares are sold off today.

In addition to GrainCorp, I think fellow agricultural businesses Costa Group Holdings Ltd (ASX: CGC) and Rural Funds Group (ASX: RFF) would be worth considering.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why BHP, GR Engineering, Novonix, and Pointerra shares are dropping today

These shares are dropping into the red on Thursday. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Cettire, Neuren, Peter Warren, and Qantas shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A mechanic rests his arms on a car he's working on, looking under the bonnet with a glum look on his face..
Share Fallers

Guess which ASX All Ords share is diving 11% to record lows today

A more cautious spender is throwing a spanner in the works of this automotive dealership.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Boss Energy, Elders, Peter Warren, and Serko shares are sinking today

These shares are out of form on Tuesday. But why?

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Share Fallers

Why Genetic Signatures, Retail Food Group, Smartpay, and St Barbara shares are tumbling today

These shares are starting the week deep in the red. But why?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Fallers

ASX 200 insider buys up another $2,000,000 in company stock following Wednesday's 15% crash

This director took Buffett's advice to heart this week.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AIC Mines, Fletcher Building, Nufarm, and Wesfarmers shares are dropping

These shares are having a tough finish to the week. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

Why BHP, Nufarm, Peninsula Energy, and Regis Resource shares are sinking today

These ASX shares are having a tough session on Thursday. But why?

Read more »