Australia surprises with rejection of $2.55 billion GrainCorp takeover by ADM

Thu Nov 28, 2013 5:59pm EST
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By Lincoln Feast and Colin Packham

SYDNEY (Reuters) - Australia rejected the A$2.8 billion ($2.55 billion) takeover of GrainCorp (GNC.AX: Quote) by U.S. agribusiness giant Archer Daniels Midland (ADM) (ADM.N: Quote) on Friday, bowing to pressure from grain growers in a rare and surprising decision.

The deal had been seen as the first test of the conservative government's vow that Australia was "open for business" after the victory of Tony Abbott's Liberal Party in elections in September.

Treasurer Joe Hockey said he was rejecting the proposal on national interest grounds after Australia's Foreign Investment Review Board (FIRB) failed to reach a consensus recommendation.

"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 told reporters in Sydney.

"Given that the transition towards more robust competition continues and a more competitive network is still emerging, I consider that now is not the right time for a 100 percent foreign acquisition of this key Australian business."

Hockey said he was open to ADM increasing its near 20 percent stake in GrainCorp to almost 25 percent, but his ruling effectively ring-fences GrainCorp from any takeover.

Shares in GrainCorp closed on Thursday at A$11.20, compared to ADM's A$12.20 per share bid, or A$13.20 per share including dividends payable by GrainCorp.

Analysts said GrainCorp shares were set to tumble once the market opened on Friday given they had traded around A$8.70 per share before ADM's initial approach and profits are coming off record highs of a year or two ago.   Continued...

Paperwork for the GrainCorp Annual General Meeting is seen inside a bag in central Sydney December 20, 2012. REUTERS/Daniel Munoz