Archer Daniels Midland Company
) recently announced additional commitments to overcome political
and farm group oppositions related to its proposed acquisition of
Australia's largest grain handler, GrainCorp Ltd.
Some politicians and farmers have been voicing their concern
over the country's food security owing to the sale of GrainCorp
to a foreign firm. Furthermore, some of the opponents believe
that the country will lose profits to overseas companies, given
the booming food demand in Asia.
At present, the matter is being reviewed by Australia's
Foreign Investment Review Board, which will announce its final
decision on Dec 17. This regulatory body will either fully
approve of the takeover or impose conditions or reject the deal
In view of these hurdles in the GrainCorp acquisition, Archer
Daniels has tried to sweeten its offer with additional
commitments. The recent commitments include an additional $200
investment towards supporting Australian agricultural
infrastructure primarily in rail enhancement projects, caps on
prices of grain handling charges at silos and ports for three
years, access to grain infrastructure for growers and third
parties, open access to port services and an advisory board for
growers and community. The new assurance is above the company's
prior investment commitment of $250 million made in November last
Archer Daniels' interest in acquiring GrainCorp is consistent
with its ongoing portfolio management initiative. The company's
strategy focuses on expanding its Agricultural Services and
Oilseeds businesses across the globe by investing in key supply
areas beyond national borders.
Apart from increasing the company's global footprint, the
aforementioned takeover will expectedly help Archer Daniels to
consolidate its financial position.
Moreover, Archer Daniel's acquisition of GrainCorp will likely
facilitate the former to broaden its scope by channeling
Australia's farm produce to meet the growing demand for crops and
food in the global market, especially in Asia and the Middle
Currently, Australia's agricultural business has ample
opportunity for agri-based companies that are seeking to expand.
Australia is a major exporter of many commodities, ranging from
minerals such as iron ore to agricultural goods like wheat.
After gaining The United States Federal Trade Commission's
approval in Nov 2012, Archer Daniels had sealed the deal in late
Apr 2013. Since then, the company has been seeking fair trade
clearance from the government agencies of different
Archer Daniels, which competes with
), has agreed to pay A$12.20 per share for all outstanding shares
of GrainCorp which totals approximately A$3.4 billion. The
American agribusiness giant already holds 19.8% stake in the
Australian agri-products dealer, acquired for an average of
A$11.24 per share.
Archer Daniels had made an initial bid of A$11.75 per share in
Oct 2012 and later raised it by 3.8% to A$12.20 per share in Dec
2012. At the time of the initial offering in October, Archer
Daniels had about 14.9% interest in the Australian farm products
At present, Archer Daniels has the acquisition sanction from
regulatory agencies in the U.S., Australia, South Africa, Canada,
Japan and South Korea, along with the European Commission.
Moreover, the company is in negotiation with the government
agencies of China and Foreign Investment Review Board of
Australia for the final clearance.
Archer Daniels procures, transports, stores, processes and
merchandises agricultural commodities and products in the United
States and abroad. The company has three major business segments:
Oilseeds Processing, Corn Processing, and Agricultural
Other Stocks to Consider
Archer Daniels currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the agri-business sector include
The Andersons, Inc.
). While Andersons holds a Zacks Rank #1 (Strong Buy), Cosan
carries a Zacks Rank #2 (Buy).
ARCHER DANIELS (ADM): Free Stock Analysis
ANDERSONS INC (ANDE): Free Stock Analysis
BUNGE LTD (BG): Free Stock Analysis Report
COSAN LTD-A (CZZ): Free Stock Analysis Report
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