Australia rejects ADM's bid to acquire GrainCorp
Dec. 2, 2013
by Keith Nunes
SYDNEY, AUSTRALIA — The Australian government has rejected Archer Daniels Midland Co.’s proposed acquisition of GrainCorp Ltd., stating that the transaction is contrary to the nation’s interest.
The decision to reject ADM’s proposal was made by Joe Hockey, treasurer of Australia, under the auspices of that nation’s Foreign Investment Review Board.
“The Australian grains industry is an important export industry that has been transitioning through a significant deregulation process since the abolition of the wheat exports single desk in 2008,” Mr. Hockey said. “Since then, deregulation has brought benefits through a significant expansion in the number of bulk wheat exporters, an expansion in our overseas customer base and the construction of new infrastructure.
“But, although a number of new players have entered the market and new infrastructure is being built, it is still taking some time for increased competition to emerge. Owning over 280 upcountry storage sites and 7 of the 10 grain port terminals in New South Wales, Queensland and Victoria, GrainCorp continues to account for a significant share of eastern Australian storage, distribution and marketing of grains. Approximately 85% of eastern Australia’s bulk grain exports are handled through GrainCorp’s ports network.
“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. Given that the transition toward more robust competition continues and a more competitive network is still emerging, I consider that now is not the right time for a 100% foreign acquisition of this key Australian business.”
This past June, ADM submitted a “bidder’s statement” with the Australian Securities and Investments Commission detailing an all-cash offer for GrainCorp’s assets worth approximately $3.5 billion.
“We are disappointed by this decision,” said Patricia Woertz, chairman and chief executive officer of Decatur, Ill.-based ADM. “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.
“Throughout this process, we worked constructively to create an arrangement that would be in Australia’s best interests and made substantial commitments to address issues that were important to stakeholders.”
Concerning ADM’s plans for its current investment in GrainCorp, Ms. Woertz said, “As owner of 19.85% of GrainCorp, we will look to work with them to maximize returns on our investment and create value for both companies.”
Mr. Hockey said he would approve any proposal from ADM to increase its investment in GrainCorp up to an interest of 24.9%.
“This would also provide a platform for ADM to build stakeholder support for potentially greater participation in the Australian industry as it develops,” he said.
Mr. Hockey added that his office has reviewed 131 “significant foreign investment” applications and ADM’s applications “is the only one we have prohibited,” he said.