The Graincorp Ltd (ASX: GNC) share price has fallen 8% in early trade in response to a negative update.
Graincorp is the largest Eastern Australian grain storage and transport network. It has seven bulk grain ports, it’s in the top five of global malt producers and it’s Australia’s largest integrated edible oils business. It exports its products to more than 30 countries. As of 2016, it has been operating for over 100 years, making it one of Australia’s oldest companies.
Why Graincorp Shares Are Down
A while ago the grain company received a large takeover offer from an interested buyer but it was very conditional and had no guarantee of going through. The $10.42 per share offer was from Long-Term Asset Partners (LTAP).
However, after the market had closed yesterday, Graincorp announced that LTAP is unable to proceed with its non-binding, indicative proposal.
After doing the due diligence of Graincorp, the offer was withdrawn.
LTAP Chairman Tony Shepherd said: “LTAP was a very serious bidder with a significant Australian and international backing across the proposed transaction. Had due diligence supporting 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 that nation’s grain growers and we wish them well”.
Whilst this was going on Graincorp has continued to progress its portfolio review to evaluate its capital management and portfolio optimisation strategies, which has resulted in: the proposed demerger of its malt business, the proposed combination of its grains and oils business, the agreement to sell its Australian bulk liquid terminals to ANZ terminals and other investments to improve the business.
Is Graincorp A Buy?
It’s very hard for me to say if Graincorp is at a good price or has a potential market-beating future ahead of it. I usually try to avoid owning shares that deal with commodities because they don’t have much control of the prices they get for their products.
The three proven and reliable ASX shares in the free report below over Graincorp shares.
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