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Australia blocks ADM’s GrainCorp takeover

By Kacey Culliney+

29-Nov-2013

Australia's Federal Treasurer Joe Hockey said the acquisition is not in the interest of the country at this time
Australia's Federal Treasurer Joe Hockey said the acquisition is not in the interest of the country at this time

Australia has blocked Archer Daniel Midland’s (ADM) A$3.4bn ($3.09bn) takeover of GrainCorp, claiming it would not be in the interest of the country.

US-based agri giant ADM and Australian bulk grains major GrainCorp both said they were disappointed.

Australian Federal Treasurer Joe Hockey vetoed the acquisition today (Friday 29) with an order under the Foreign Acquisition & Takeovers Act.

The final takeover bid was filed in April 2013 , after two earlier, lower bids were rejected.

Hockey described the proposed acquisition as “one of the most complex cases” ever considered by the Foreign Investment Review Board (FIRB) given the size of GrainCorp and the fact it is one of the last remaining independent grain traders in the country.

“Many industry participants, particularly growers in eastern Australia, have expressed concern that the proposed acquisition could reduce competition and impede growers’ ability to access the grain storage, logistics and distribution network,” he said in a statement.

Hockey said the Australian grains sector continues to undergo change as new players enter the market and new infrastructure is built, but increased competition is still taking time to emerge.

“Given that the transition towards more robust competition continues and a more competitive, I consider that now is not the right time for a 100% foreign acquisition of this key Australian business,” he said.

He added that the Australian government recognized the need for foreign investment and is not against it, providing it is of national interest.

ADM and GrainCorp ‘disappointed’

ADM, which has been gunning for a takeover since it filed its first bid in October 2012 , said it was disappointed with the decision to block the acquisition.

“We are confident that our acquisition of GrainCorp would have created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy,” said ADM chairman and CEO Patricia Woertz.

She said ADM had endeavoured to create an arrangement that would be in Australia’s best interest and had made commitments to address issues that were important to stakeholders.

GrainCorp also said it was disappointed. “Australian agriculture has been prevented from realising the potential benefits from the significant capital ADM would have invested in the long term future of the industry,” said GrainCorp chairman Don Taylor.

ADM to leverage its share and review 2014 business plan

ADM still has a 19.85% share of GrainCorp – a share that it will look to maximize returns on and create value for both companies with, Woertz said.

Now ADM’s A$3.4bn takeover had been rejected, she said the company would review its capital allocations as part of its wider 2014 business plan.

“We have an attractive pipeline of opportunities that are consistent with our focus on value creation and fit our strategy for profitable growth,” she said.

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