GrainCorp stock soars on sweetened $3.4bn ADM bid SHARES in Graincorp jumped more than $1 to an all-time high of $12.88 today after the grain handler agreed to grant US giant Archer Daniels Midland access to its books in return for a sweetened takeover bid. ADM agreed to Graincorp paying a $1 special dividend to shareholders, on top of the suitor's $12.20-per-share cash bid, in return for due diligence and a recommendation from the board in favour of the bid. In a dramatic aboutface announced this morning, GrainCorp said it would grant ADM due dilligence and give unanimous board support for the bid if ADM decides to proceed. It is ADM's third attempt to secure Australia's biggest grain handler. ADM, which processes and trades grain from its headquarters in Illinois, first approached GraincCorp last October with a $11.75-per-share bid, worth $2.6 billion, which GrainCorp rejected. A second approach in December at $12.20-per-share, worth $2.8 billion, was also rebuffed. Investors had begun to believe that the bid talks had petered out, despite ADM having acquired a 19.8 per cent stake in Graincorp at an average price $11.24 a share and sold stakes in Mexico's Gruma and several of its units for $US450 million in order to pay for a GrainCorp deal. GrainCorp's sharesdrifted to a low of $11.36 last week, 84 cents below the ADM bid price because of the apparent stalemate. Today the stock jumped as high as $12.88, up $1.01, before settling up 96 cents at $12.83 in the early afternoon. GrainCorp chairman Don Taylor and chief executive Alsion Watkins declined to reveal when and why talks had resumed, although Mr Taylor said that the bidder and target began to get close to agreement on value last weekend. The scenes talks have elicited a sharp increase in the consideration offered to shareholders. Graincorp will pay $1 a share in a special dividend before the bid closes and 3.5c a share per month for every month from October 1 that the bid does not clear regulatory hurdles. This means shareholders would receive at least $13.20 per share for their GrainCorp holdings, closer to the $13-$14-per-share range that directors were said to have sought from ADM. ADM said that the agreement made the transaction worth $3.4 billion in total. The dividends, to be paid out of current and retained earnings, will, with franking credits available to Australian shareholders, lift the value of the bid to investors on the top marginal tax rate to $13.63. The increase allows ADM to improve its offer without unsettling its shareholders by lifting the headline takeover price of $12.20 a share, which it has previously described as full and fair. Graincorp, meanwhile, which said in December that the then-increased $12.20-a-share offer did not reflect the board's view of the value of the company, can also claim to have won a significant increase in the value of the offer to its shareholders. Graincorp's franking credits - which pass the benefit of tax already paid by the company to shareholders - are not as valuable to foreign investors and owners of businesses. "We are pleased to have reached agreement with GrainCorp to conduct due diligence and, subject to that due diligence, put a recommended offer before GrainCorp's shareholders," ADM chair and chief executive Patricia Woertz said in a statement posted on the company's website. We anticipate that the offer will be cash accretive in the first full year and will meet our key financial objectives. "The addition of GrainCorp to our global network would fit our strategy and help to further connect Australia's growers with growing global demand for crops and food, particularly in Asia and the Middle East," Ms Woertz added. ADM and GrainCorp have complementary geographies with little overlap and highly compatible cultures. Under the agreement, ADM has seven days to conduct the due diligence and will announce whether the bid will proceed on May 2 at 8am AEST, at the same time as its first-quarter earnings are released. On a conference call following the deal's announcement, Ms Watkins said that the company had received interest from other suitors but declined to give further details. ADM has two days to match any higher offer, she added. "We know that GrainCorp is an attractive business with attractive assets," she said. The level of interest reflects those assets and the strategic significance that we have. Sujit Dey, at J.P. Morgan's specialist equities sales desk, said the structure of the deal signalled that GrainCorp believed there was a chance it may get another offer and showed how "desperate" ADM was to take control of the Australian company. "It is the first time that I can remember any deal where a break fee is not in place," he said in a note to clients. The deal would complete a suite of big foreign takeovers of Australian grain handlers, with the former wheat export monopoly AWB acquired by global giant Cargill and ABB Grain scooped up by Agrium/Viterra. Global players see the Australian grains industry as a growth market with potential to play a major role in feeding the growing middle classes of Asia. The acquisition will require approval from 50.1 per cent of GrainCorp shareholders, as well as from Australia's Foreign Investment Review Board and China's Ministry of Commerce. GrainCorp has an edible oils facility in China. GrainCorp, which started life in 1916 as the NSW Grain Elevators Board, has been through various incarnations and now controls seven terminals down Australia's east coast that carry about 90 per cent of the eastern seaboard's grain exports. It also operates 280 regional storage sites, focusing mainly on wheat, barley and canola, with capacity for chickpeas, sorghum and other grains. Its barley operations have also made it the world's fourth-biggest maltster. ADM, meanwhile, is one of the biggest players in soybeans and maize, with more than 265 processing plants, 460 crop procurement facilities and crop transportation networks in more than 140 countries.