Is Something Brewing at Archer Daniels Midland?
Two billion dollars is a lot of cash for "general corporate purchases". Sounds more like it is for an "investment in long term opportunity".
Archer Daniels Midland Company (ADM) announced that it plans to offer and sell, subject to market and other conditions, 35,000,000 equity units and to grant the underwriters an option to purchase 5,000,000 additional equity units to cover over-allotments. Each equity unit has a stated amount of $50, for a possible aggregate offering amount of $2 billion if the underwriters exercise their over-allotment option in full.
The equity units will initially consist of a contract to purchase ADM common stock and a 5.0% beneficial ownership interest in a $1,000 principal amount debenture due June 1, 2041. Under the purchase contract, holders are required to purchase ADM common stock no later than on June 1, 2011. ADM intends to use substantially all of the net proceeds from this offering for general corporate purposes, including repayment of short-term indebtedness and investment in long-term growth opportunities.
I wrote in the past about possible ADM targets, the latest being this one about a possible Cuban investment. ADM has been pretty upfront about its desire to expand it capacity in other nations with lower feedstock costs.
One would have to pretty naive to think that a $2 billion capital raising was for anything but.
What will be really interesting is not the "will it or won't it" question but the "where" will it decide to do it. My guess is ADM will be taking a trip south........ outside of our borders...
Companies like Pacific Ethanol (PEIX) and Verasun (VSE) are not cheap by any means. Given their current predicaments, share price aside, I would be shocked if ADM expressed interest. The most diversified of the bunch, The Andersons (ANDE) most likely has no interest in being sold. That leaves Cuba and Brazil as the most likely targets...
Just popping into my head....maybe a rail investment? ADM already has extensive rail operations and is a huge user of the industry, maybe buying into it and profiting with it would help? Either way, it is gonna be fun...
Disclosure: Long ADM
Get Seeking Alpha Free Stock Alerts by Email!
Get Free Stock Alerts by Email!
ETFs In Focus
-
Editor's Picks
-
Most Popular
- Don't Believe the Gold Bears' Hype
- Freddie/Fannie Plans In Motion; Why Are They Being Underplayed?
- Hedge Funds Are Getting Their Butts Kicked Too
- Energy Independence: It's About Demand, Not Supply
- Housing Prices: Bottom or Temporary Bear Break?
- McCainomics: What Can He Do?
- Full list of Editor's Picks »
- Wall Street Breakfast: Must-Know News »
- Apple: Steve and I Have Been Wrong »
- Gold Futures' Dirty Secret (Part II) »
- Rescuing Frannie »
- Why Commodities May Be Nearing a Turning Point »
- Friday Outlook: What Phony Sell-off?! »
- Corning: Looking Very Cheap »
- Is Gold Getting Ready to Bounce? »
- The $64 Trillion Question: What's the Dollar Really Worth? »
- Fannie, Freddie Headed for Conservatorship »
- RBC Analysts Expect Potash Corp. Stock to Double »
-
Long Ideas
-
Short Ideas
-
Cramer's Picks
- Global Equities Falling Through Support
- Don't Believe the Gold Bears' Hype
- Fannie & Freddie Bailout? - Fast Money Recap (9/5/08)
- Unconventional Energy Still Attractive - UBS
- Red Hat / Qumranet Deal Adds Fuel to the Virtualization Fire
- ETF Pick of the Week: iShares MSCI Netherlands
- Altria's Last Legal Hurdle Should Be Settled This Fall
- How Wal-Mart Really Beats Expectations
- Corning: Looking Very Cheap
- Leucadia's Key to Success
- Full list of Long Ideas »
- Nuance Communications: An End to Acquisitive Growth
- Short Interest Rising in Tesoro; Shorts Covering Airline Positions
- Harbinger Capital: Cut Short
- Not Much Meat on Pilgrim's Pride's Bones
- Salesforce.com: Demystifying the Force
- Should We Listen to Boone Pickens on Oil?
- Energy Conversion Devices: Ridiculously High Valuation
- Three Reasons Solar Sell-off May Be in Early Innings
- Is the Market Rolling Over?
- Solar and Oil, Part Deux
- Full list of Short Ideas »
- Fed Should Cut Rates - Cramer's Mad Money (9/5/08)
- Bullish on Wachovia - Cramer's Lightning Round (9/5/08)
- Worst Downgrades - Cramer's Stop Trading! (9/5/08)
- Pimco's Bill Gross: Jim Cramer Is 'Courageous' and 'Entertaining'
- Cramer Sees the Light - Cramer's Mad Money (9/4/08)
- Keep Buying Big Brown - Cramer's Lightning Round (9/4/08)
- Don't Buy These Bonds - Cramer's Stop Trading! (9/4/08)
- Loss of Integrity - Cramer's Mad Money Recap (9/3/08)
- Not Off the RIMM - Cramer's Lightning Round (9/3/08)
- Unbelievable Moves - Cramer's Stop Trading! (9/3/08)
- Full list of Cramers Picks »
Trading Center
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
This article has 7 comments:
L. Johnson
Is it possible that ADM and its peers may find themselves sitting with unused ethanol capacity in three, five or 10 years?
Are investors appropriately evaluating the risks that political ethanol subsidies could be taken away and even replaced by taxes?
What are the chances that corn ethanol can be replaced by non corn ethanol, and are those expectations too optimistic? Why or why not?
Who will buy into the ADM offering? Smart investors or naive ones?
See:
www.crossprofit.com/ar...
CrossProfit
L. Johnson
Talk about insider selling!
This is NOT insider trading. Everything that ADM has done in the past and is doing now is in full view of the publics scrutiny. If you (not you personally) choose to misinterpret or ignore the information, this is not ADM's responsibility to correct.
The 3.8% drop today is the markets way of signaling that it has understood the message. Issuing equity for the sake of paying off previously accumulated debt is dilution by core definition.
On the other hand, issuing equity for the purpose of making a new acquisition is replacing one asset with another so to speak, and is not necessarily dilutive by nature unless there is a large amount of goodwill or excessive premiums built in to the transaction.
CrossProfit
Kidding?!