Australia halts ADM's GrainCorp deal

Published on: Nov 29, 2013

DESPITE a package of investments and commitments designed to sweeten the taste of Archer Daniels Midland’s A$3.4 billion purchase of Australia’s GrainCorp, the country’s Federal Treasurer ruled Thursday that the two companies could not consummate the proposed acquisition.

Ruling that the deal was ‘not in Australia’s national interest,’ treasurer Joe Hockey said that the proposed acquisition of GrainCorp by ADM was one of the most complex cases to come before the Foreign Investment Review Board (FIRM), and was one of the most significant proposed acquisitions of an agricultural business in Australia’s history.

“Given the contentious nature of this application, I have been conscious of addressing the uncertainty surrounding the timing of a decision,” Hockey said in a statement. “In their response to my request for advice on the wider ramifications of this case, the members of the FIRB could not agree on a consensus recommendation in relation to the proposal.

According to Hockey, GrainCorp owns more than 280 up-country storage sites and seven of the 10 grain port terminals in New South Wales, Queensland and Victoria, accounting 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.

That concentration of assets, coupled with “a high level of concern from stakeholders and the broader community,” led Hockey to determine that the acquisition was contrary to Australia’s national interests. The two companies announced a package of investments and commitments earlier in the week that was designed to make the acquisition more palatable for those stakeholders concerned that the deal would hinder competition in the country.

ADM currently owns 19.85 per cent of GrainCorp; it acquired a significant investment in the company as the opening salvo in its acquisition bid.  Under Australian law, Hockey said he was authorized to cap ADM’s shareholding in GrainCorp at its current level, but opted not to do so.

“In fact, to encourage ADM to demonstrate its commitment to the Australian grains industry through its continued investment in GrainCorp, I am inclined, based on current circumstances, to approve any proposals from ADM to increase its shareholding in GrainCorp up to an interest of 24.9%,” he said. “This would also provide a platform for ADM to build stakeholder support for potentially greater participation in the Australian industry as it develops.”

Failing to finalize the acquisition, a deal ADM has been working on for more than a year, leaves the Illinois-based heavyweight with little more than a sizable ownership interest in its intended target to show for its efforts.

“We are disappointed by this decision. 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.

“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,” she said. Woertz confirmed there were no conditions or undertakings requested of ADM by the Treasurer.

Concerning ADM’s plans for its current investment in GrainCorp, Woertz said, “As owner of 19.85 percent of GrainCorp, we will look to work with them to maximize returns on our investment and create value for both companies.”