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Australia Blocks $3.1B Takeover Bid by ADM for GrainCorp

Mon, 12/02/2013 - 10:07am
ROD McGUIRK, Associated Press

CANBERRA, Australia (AP) — Australia on Friday blocked the 3.4 billion Australian dollar ($3.1 billion) takeover bid by U.S. food giant Archer Daniels Midland Co. for GrainCorp Ltd.

Treasurer Joe Hockey, invoking a rarely used power to veto foreign investment, said he rejected the 100 percent takeover of GrainCorp because it would not be in the Australian national interest.

ADM, which owns a nearly 20 percent stake in GrainCorp, offered to buy the remaining 80 percent of the company last year. A sweetened offer in May amounted to 12.20 Australian dollars ($12.63) a share in cash, giving GrainCorp a value of AU$3.4 billion.

The application was the most contentious foreign takeover bid since previous governments blocked the sale of the Australian Securities Exchange to the Singapore Exchange in 2011 and Royal Dutch Shell PLC was barred from buying Australian oil and gas rival Woodside Petroleum Ltd. In 2001.

GrainCorp's share price tumbled 22 percent to AU$8.72 on Friday. The price was about the same as it was in October 2012 when ADM first launched its takeover bid.

GrainCorp owns more than 280 Australian grain storage sites and seven grain port terminals and handles 85 percent of eastern Australia's bulk grain exports.

"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," Hockey said in a statement.

Hockey said he would allow ADM to increase its stake to 24.9 percent.

"This would also provide a platform for ADM to build stakeholder support for potentially greater participation in the Australian industry as it develops," Hockey wrote.

ADM chairman and chief executive Patricia Woertz said the company was disappointed by the 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," Woertz said in a statement.

She said that Hockey requested "no conditions or undertakings" from ADM.

Given the rejection of its bid for GrainCorp, Woertz said ADM is reviewing how it will use the unutilized capital, including distributions of cash to shareholders.

The Decatur, Ill., company currently pays a quarterly dividend of 19 cents per share.

ADM has been looking to invest in overseas suppliers and Australia is a major exporter of commodities, including iron ore and wheat. It has said that full ownership of GrainCorp would help expand its agriculture business in the Middle East, Africa and Asia.

GrainCorp chairman Don Taylor warned that blocking the deal would have "enduring implications" for Australia's entire agricultural industry.

"Australian agriculture has been prevented from realizing the potential benefits from the significant capital ADM would have invested in the long term future of the industry," Taylor said in a statement.

ADM first lodged its takeover application in May with Australia's Foreign Investment Review Board, which reports to the treasurer on whether proposed foreign takeovers pass the Australian national interest test.

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