* GrainCorp agrees to $3.1 bln takeover by ADM
* Deal must be approved by Chinese regulators
* Includes extra dividend payments if approval delayed
* Bolsters ADM against rivals Bunge and Cargill
By Jane Wardell and Colin Packham
SYDNEY, April 26 Australia's GrainCorp Ltd
and U.S. suitor Archer Daniels Midland Co are
hunkering down for a long wait for Chinese regulatory approval
after agreeing a A$3.0 billion ($3.1 billion) takeover deal on
In a sign of China's growing scrutiny of global M&A deals,
GrainCorp and ADM have tailored the deal to include an extra
payment for shareholders from October to reflect an expected
delay in approval from China's Ministry of Commerce.
"(Chinese approvals) tend to drag on longer than we would
normally expect in the marketplace," Chairman Don Taylor told
reporters, adding he expected the deal to close this year, but
acknowledging it could take up to eight months.
Graincorp's board, which rejected two earlier offers from
ADM during a six-month courtship, backed a revised A$13.20 a
share deal that included A$1.00 a share in dividends, ceding
control of Australia's largest independent grains handler.
The takeover is the latest move in the rapid consolidation
of the global grains sector amid intense competition to feed
fast-developing countries, and boosts ADM's international
Recent commodity takeovers have faced delays and tough
conditions from Chinese regulators, underscoring Beijing's
anxiety over food security.
China took several months to approve Glencore International
Plc's C$6 billion ($6 billion) purchase of Canadian
grain handler Viterra Inc, and this week imposed stiff
conditions on Japanese trading house Marubeni Corp's
$5.6 billion purchase of U.S. grain merchant Gavilon in a deal
that was held up for months.
GrainCorp appeared not expect punishing conditions to be
imposed on the deal with ADM as it had agreed in advance of
regulatory approval, said Rebecca Maslen-Stannage, a mergers and
acquisition lawyer at Herbert Smith Freehills in Sydney.
However, the inclusion of an extra dividend of 3.5 cents per
share a month from October if regulatory approvals lagged beyond
the start of that month anticipated the possibility of delays.
"Target companies have been looking very hard at what
protection they can get from both the time it takes for approval
and the risk of conditionality," Maslen-Stannage said.
"This addresses the time element in a way we haven't seen
previously," she added.
The world's biggest wheat producer and consumer, China is
increasingly looking to the import market to fill a domestic
shortfall in the supply of high-quality grains and to build
China's wheat imports are expected to climb to 3.2 million
tonnes in the year to June, 2013, compared with 2.9 million
tonnes a year ago and 927,000 tonnes in 2010/11, according to
the U.S. Department of Agriculture.
ADM supplies 12-17 percent of China's total soybean imports,
according to estimates by traders, and has a stake in a soybean
processing business owned by Wilmar International Ltd.
It also supplies corn and other food products.
Graincorp has an edible oils facility in China.
ADM -- one of the four "ABCD" firms that have dominated the
global agricultural business for decades -- is more U.S.-focused
than rivals Cargill, Bunge and Louis Dreyfus.
The U.S. giant was attracted to GrainCorp's dominant
position on Australia's east coast, where it operates seven of
the eight bulk grain elevators, handling up to 60 percent of the
region's wheat, barley, canola, chickpea and sorghum crops.
The deal makes ADM a "little more rounded on the world front
to line themselves up better" with rivals Bunge and Cargill,
said Jason Britt, president of Central States Commodities in
Shares in GrainCorp shares jumped 8 percent to a record high
of $12.83 on Friday.
"Not only did GrainCorp get an attractive takeover price,
but shareholders are essentially being paid to hang around until
regulatory approval has been granted," said Belinda Moore,
senior analyst at RBS Morgans.
ADM was advised by Citi and Barclays, while
Credit Suisse and Greenhill advised GrainCorp.