ADM sweetens GrainCorp bid

Published on: Nov 27, 2013

Archer Daniels Midland continues to take steps to woo critics in its $3.4 billion acquisition of Australia’s largest grain handler GrainCrop. The U.S. agribusiness giant upped the ante Tuesday, committing to an additional A$200 million in infrastructure investments, as well as a package of commitments related to pricing and market access.

“Throughout our effort to secure approvals for our proposed acquisition of GrainCorp, we have worked constructively to create value for grain growers and the Australian economy, as well as shareholders of GrainCorp and ADM,” said ADM Grain president Ian Pinner. “Taking into account the feedback we received, we are committing to a further package of investments and initiatives to help ensure that Australian agriculture is able to serve a key role in meeting growing global demand.”

ADM successfully convinced GrainCorp’s executive leadership of the merits of its offer in April, following nearly 6 months of negotiations both public and private. Its current offer of A$12.20 per share received the approval of company shareholders, as well as Australian competition authorities, but political pressure has mounted, and reports indicate that the Prime Minister’s office is considering putting a stop to the deal.

Australian treasurer Joe Hockey is slated to rule on whether the deal is in Australia’s best interest on Dec. 17, having delayed a decision by at least two weeks.

As part of its original bid to purchase the company, ADM committed A$50 million in additional capital spending beyond GrainCorp’s planned capital investments. The additional commitment, announced Nov. 26, represents a $100% increase in GrainCorp’s original capital expenditure budget.

According to Pinner, the investments will focus on rail enhancement projects, among other infrastructure improvements.

GrainCorp chairman Don Taylor said that his company has invested an average of A$17 million annually in its storage and logistics network as part of a A$50-60 million annual capital expenditure budget.

“Clearly, new investment on the scale outlined by ADM will benefit growers and our industry by improving the efficiency and international competitiveness of our network,” he said. Australia exports roughly 70% of its agricultural production, selling mostly to countries in the Asia-Pacific region.

In addition to its spending pledge, ADM pledged to implement price caps on grain handling charges at silos and ports, in addition to a pledge to grant infrastructure access for growers and third-parties, including an “open access regime” for the company’s vast port services. Critics fear that a foreign owner might curb access to GrainCorp’s infrastructure, effectively stifling competition in the country.

ADM had hoped to close the proposed transaction by year’s end, but did not comment on an expected closing data in releasing its latest bid to win friends and influence Australian officials.