While ”opportunistic" was a word used by IAG, it also springs to mind insofar as the Graincorp bid for Ridley is concerned. And, yes, it was also a descriptor that entered the word processor of the Ridley board and their advisers yesterday in the rejection of the GrainCorp offer.
The Chairman of Ridley Dr John Keniry said in the statement: “GrainCorp’s unsolicited takeover offer is opportunistic; it fails to deliver a meaningful control premium to Ridley shareholders and exposes them to considerable uncertainty about the future value of GrainCorp shares which are highly dependent on cropping conditions and have demonstrated substantial earnings volatility in the past.
"The board of Ridley intends to unanimously recommend shareholders reject the offer and directors intend to do so in respect of shares under their control.
“We have spoken to a number of our major shareholders that collectively hold more than 10% of our share capital and it is our view that they will not accept the current offer. With a 90% acceptance condition it is therefore fatally flawed and cannot succeed,” he said.
GrainCorp launched its all scrip bid for Ridley last Friday, offering one of its shares for every nine Ridley shares.
It valued the target at $1.39 a share or $415 million, or $592 million on an enterprise value basis, including debt. Ridley shares eased half a cent yesterday to $1.41 as the market keeps hoping for a counter offer.
The talk in the RIC statement about failing to "deliver a meaningful control premium to Ridley shareholders" is the crux of the rejection, not that it is opportunistic.
What Ridley is saying to Graincorp is: put more value on the table, say some cash and we will get serious and start talking.
Dr Keniry said the only appropriate way to assess Ridley’s value was in the context of the outcome of a strategic review that was announced on May 7.
The review highlighted the existence and value of surplus land holdings, which have been independently valued at more than $80 million.
He said GrainCorp’s offer values Ridley at $1.331 per share, based on GrainCorp’s closing share price of $12 on Tuesday.
It also compared to a Ridley share price of $1.30 immediately prior to the announcement of the GrainCorp offer.
"Dr Keniry also said that GrainCorp had recorded an earnings loss in the year ended September 30, 2007, and was forecast to make another loss this year.
"It is difficult to recommend swapping Ridley shares for GrainCorp shares, where underlying earnings levels are highly variable depending on seasonal conditions," he said.
GrainCorp shares were down 20c at $11.80. That values RIC shares at around $1.31.
