Two billion dollars is a lot of cash for “general corporate purchases”. Sounds more like it is for a “investment in long term opportunity”.
Archer Daniels Midland Company (ADM) today 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 have 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 “are they or aren’t they” question but the “where” they decide to do it. My guess is they 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 interst. The most diversified of the bunch, The Andersons (ANDE) most likely has no interest in being sold. That leave 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, gonna be fun…
Disclosure (“none” means no position):Long ADM, None
