U.S. agribusiness giant Archer Daniels Midland tightened its grip on GrainCorp, hiking its bid to $2.9 billion and buying more shares, but may need to offer more to win over Australia's last major independent grains handler.
Australian grains, food and agricultural businesses have been snapped up by large global players in recent years, part of a global consolidation amid intense competition to feed fast-developing countries seeking food security.
GrainCorp is the last available independent asset of scale in Australia, the world's second-largest wheat exporter and an attractive market due to stable policies and good links to Asia.
ADM, which is looking to increase its geographical spread, upped its offer by 3.8 percent from A$11.75 per share to A$12.20 per share in cash -- a 40 percent premium to GrainCorp's share price at the time of the initial offer.
The new proposal sent GrainCorp shares up 3 percent to A$12.32, suggesting investors may hold out for a higher offer.
"The current offer should open the way for ADM to engage with Graincorp's board," Dennis Hulme, senior analyst at BBY Ltd, suggesting the bid could be sweetened for shareholders through a special dividend.
"There has been speculation that GrainCorp is seeking over A$13 a share but with no competing bidders and the passage of time that looks less likely. I believe a A$12.50 share offer, which includes a special dividend would be a good outcome for shareholders."