Archer Daniels Midland Company's (
efforts seems to have been in vain as the Australian government
ruled out the company's takeover bid for GrainCorp Ltd., the
country's largest grain handler on grounds of national interest.
As the deal was much awaited, the market is apprehended to react
negatively to this news once it opens today and we may see a
significant fall in Archer Daniels' share price.
The rejection signifies the newly elected government's
conservative approach towards opening doors to foreign companies.
The recent decision followed strong opposition from certain
politicians and farmers who expressed concern regarding the
country's food security owing to the sale of GrainCorp to a
foreign firm. Furthermore, those opposing the acquisition believe
that the country will lose profits to overseas companies, given
the booming food demand in Asia.
Australian treasurer, Joe Hockey stated that the time is not
appropriate to allow a foreign company to acquire 100% stake in
the key agricultural business. However, he announced that Archer
Daniels may increase its shareholding in GrainCorp to 25% from
the current holding of 19.8%.
The rejection comes as a major setback to Archer Daniels'
strategy of expanding its Agricultural Services and Oilseeds
businesses globally by investing in key supply areas beyond
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.
Being the largest grain handler in Australia, GrainCorp
handles approximately one-third of the country's wheat
production. Moreover, the company owns 7 out of 10 grain port
terminals in the country's eastern region and accounts for 85% of
the exports in the region.
Therefore, Archer Daniel's acquisition of GrainCorp would have
facilitated the former to broaden its scope by channeling
Australia's farm produce to meet the rising demand for crops and
food in the global market, especially Asia and the Middle
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
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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