Australian grains handler GrainCorp Ltd yesterday rejected a sweetened $2.9 billion bid from US agriculture giant Archer Daniels Midland Co (ADM), saying that the revised offer continues to undervalue the company.

The rejection came after the company posted a record annual net profit last month due to a bumper harvest last season.

''The increase in the proposed price has not changed the board's view that ADM's proposal materially undervalues GrainCorp,'' the Sydney-based company said in a statement. ''GrainCorp's board will be constructive in any dealings in relation to proposals that have the potential to be in the best interests of shareholders.''

Illinois-based ADM, which is seeking to expand outside the US, last month raised its offer by 3.8 per cent from A$11.75 per share to A$12.20 per share, a 40-per cent premium to GrainCorp's share price at the time of the initial offer on 21 October. (See: Archer Daniels Midland sweetens offer for Australia's GrainCorp to $2.9 bn)

ADM, which already held a 9.9-per cent stake in Graincorp, had acquired an additional 10 per cent with the approval of the Australian Foreign Investment Review Board for A$11.75 per share, a few days before tabling its initial offer.

Raising its stake near the 20-per cent threshold level automatically triggers a full takeover bid under Australian securities law.

Analysts have earlier said that the sweetened offer was still below the average acquisition multiple for Australian and global agribusinesses based on forward earnings.

ADM, which has tabled its offer at a wrong time by not foreseeing a bumper harvest in Australia, said that its revised proposal represented fair value and would consider all its options.

Although it raised its offer marginally, it anticipated a rejection, according to analysts. It will have to wait when GrainCorp earnings growth disappoints the market and again re-initiate another takeover, they add.

Founded in 1916, Graincorp, originally called Government Grain Elevator, a part of the New South Wales government's department of Agriculture, was formed to transport grain from the grain-producing regions of New South through railways.

After being privatised in 1992, Graincrop expanded through strategic acquisitions.

In 2002 GrainCorp entered into a joint venture with US agribusiness giant Cargill to purchase Allied Mills, and acquired United Malt Holdings, the world's fourth-largest commercial malt manufacturer for $757 million in 2009, and German Schill Malz in 2011 for $75.8 million.

GrainCorp has over 280 country elevators in Australia, grain storage capacity of up to 20 million tonnes spread across more than 2,700km from Queensland to Victoria, and operates seven bulk grain export elevators, serviced by 20 contracted trains with the capability of hauling up to 4 million tonnes of grain annually.

GrainCorp Marketing buys and sells more than 4.5 million tonnes of wheat, barley, sorghum and canola per year, while GrainCorp Malt is one of the world's largest commercial malt producers, producing over 1 million tonnes of specialty malts annually for the world's leading brewers and distillers.

Founded in 1902 by George Archer and John Daniels, ADM is one of the world's largest agricultural processors with more than 270 processing plants, 420 crop procurement facilities and a large crop transportation network.

With annual sales of over $80 billion and market capitalisation of more than $19 billion, ADM is 10 times the size of GrainCorp by value.

Analysts had earlier said that there could be rival bidders like Cargill, Bright Foods, Bunge, Wilmar and Louis Dreyfus due to the strategic nature of Graincorp's assets, but with ADM acquiring 19.9 per cent of GrainCorp, a competing offer is now unlikely.

The agriculture sector has seen two large acquisitions this year. In March, commodities giant Glencore International struck a $6.2 billion cash deal to acquire Canada's largest grain handling company Viterra Inc, and In May, Japan's Marubeni bought US grain merchant Gavilon, for $3.6 billion.