Archer Daniels Midland Company
) is contemplating the acquisition of Australia's GrainCorp
Limited, in sync with its ongoing portfolio management
initiative. In pursuit of narrowing down on the acquisition deal,
the company has approached the Board of Directors of GainCorp and
proposed an all cash acquisition buyout transaction.
ARCHER DANIELS (ADM): Free Stock Analysis
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Last week, Archer Daniels broadened its economic interest in
GainCorp by acquiring an additional 10% interest for A$11.75 per
share. The company now holds a 14.9% interest in the Australian
farm products dealer.
Archer Daniel's interest in the deal also coincides with its
strategy of expanding its Agricultural Services and Oilseeds
businesses across the globe by investing in key supply areas
beyond national borders. Apart from making way for the company's
strategy of solidifying its global footprint in the key
agricultural regions via acquisitions and joint ventures, the
buyout is expected to help the company ease its financial
constraints as GrainCorp is a well-managed company.
Moreover, Archer Daniel's union with GainCorp is expected to
position the latter well to broaden its scope, by channeling
Australia's farm produce to meet the growing demand for crops and
food in the global markets, particularly in Asia and the Middle
Archer Daniels Midland procures, transports, stores, processes,
and merchandises agricultural commodities and products in the
United States and internationally. The company has three
major business segments: Oilseeds Processing, Corn Processing,
and Agricultural Services. Currently, Archer Daniels Midland has
30,000 workers around the world and runs around 270 processing
plants and provides 420 crop procurement facilities. The
company's prime competitors include Cargill Inc.,
Tyson Foods Inc.
) and Corn Products International Inc.
We maintain our long-term 'Underperform' recommendation on the
stock based on the disappointing fourth quarter results of fiscal
2012. However, the company has a Zacks #3 Rank, implying a
short-term 'Hold' rating.