S&P sees long-term benefit for ADM from GrainCorp deal

Fri May 3, 2013 6:25pm EDT
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* S&P affirms 'A' rating, with negative outlook

* GrainCorp deal could bring earnings growth in years ahead

By Tom Polansek

CHICAGO, May 3 (Reuters) - Standard & Poor's Ratings Services said on Friday that Archer Daniels Midland Co's planned A$3.0 billion ($3.1 billion) acquisition of Australia's GrainCorp Ltd should yield benefits for the U.S. agribusiness company in the coming years.

S&P removed ADM, one of the world's top grain traders, from its watch list for a potential ratings cut and affirmed an 'A' corporate credit rating.

The agency said it still has a negative outlook for ADM, "reflecting our expectations for continued weaker credit measures once the transaction is complete" and uncertainty about the size of the U.S. harvest later this year.

S&P first put ADM on the watchlist in October when ADM made an initial bid for GrainCorp.

The GrainCorp acquisition is expected to pay off in the longer run because it will expand ADM's global footprint and give it an important foothold in the rapidly-growing Asian market, according to S&P.

"Although ADM participates in a challenging industry characterized by volatile commodity prices, we believe management's ongoing capital investments in its core business lines will generate meaningful earnings growth over the next several years and increase geographic diversity, which should help offset inherent earnings volatility," the agency said in a report.   Continued...