Australia says no to US acquisition of GrainCorp

Treasurer cites concerns over national interest for rejecting ADM's A$3.4b proposed offer

PUBLISHED : Saturday, 30 November, 2013, 4:27am
UPDATED : Saturday, 30 November, 2013, 4:27am


The Australian government rejected yesterday the A$3.4 billion (HK$24 billion) sale of GrainCorp to American agribusiness giant Archer Daniels Midland, saying it went against the national interest.

Treasurer Joe Hockey said the sector was still moving towards more robust competition and that a foreign takeover of the biggest grain handler in eastern Australia could undermine public support for foreign investment in general.

"Now is not the right time for a 100 per cent foreign acquisition of this key Australian business," he said, a decision that sent GrainCorp shares diving more than 20 per cent from Thursday's close.

The bid met strong opposition from grower groups and the National Party, which is part of the governing coalition that declared Australia "open for business" after winning September elections.

"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community," Hockey said in a statement.

He said the Foreign Investment Review Board assessing the proposal had been split on whether to give the green light to the takeover, which was "one of the most significant proposed acquisitions of an agricultural business in Australia's history".

But he had ultimately decided that Australia's grain export industry was still working through a significant deregulation process, which started in 2008 with the abolition of the single desk for wheat exports.

"Although a number of new players have entered the market, and new infrastructure … is being built, it is still taking time, some time for increased competition to emerge," Hockey said.

ADM owns more than 280 storage sites and seven of the 10 grain port terminals in New South Wales, Queensland and Victoria. About 85 per cent of eastern Australia's bulk grain exports are handled through its port network.

Hockey said growers had expressed concern that the proposed acquisition would reduce competition and impede their ability to access grain storage, logistics and distribution networks.

ADM voiced disappointment at the decision against its proposal, a bid it had sweetened in recent days with an increased A$250 million spending on infrastructure.

Hockey noted ADM's comments that it wanted to be involved in the Australian marketplace for the long term and, to encourage it, said he would allow an increase of its shareholding in GrainCorp to 24.9 per cent. It now holds 19.85 per cent.