* Treasurer Hockey rejects offer on national interest
* Grain growers worried about foreign ownership of key east
* GrainCorp shares set to fall
By Lincoln Feast and Colin Packham
SYDNEY, Nov 29 Australia rejected the A$2.8
billion ($2.55 billion) takeover of GrainCorp by U.S.
agribusiness giant Archer Daniels Midland (ADM) on
Friday, bowing to pressure from grain growers in a rare and
The deal had been seen as the first test of the conservative
government's vow that Australia was "open for business" after
the victory of Tony Abbott's Liberal Party in elections in
Treasurer Joe Hockey said he was rejecting the proposal on
national interest grounds after Australia's Foreign Investment
Review Board (FIRB) failed to reach a consensus recommendation.
"Many industry participants, particularly growers in eastern
Australia, have expressed concern that the proposed acquisition
could reduce competition and impede growers' ability to access
the grain storage, logistics and distribution network," Hockey
told reporters in Sydney.
"Given that the transition towards more robust competition
continues and a more competitive network is still emerging, I
consider that now is not the right time for a 100 percent
foreign acquisition of this key Australian business."
Hockey said he was open to ADM increasing its near 20
percent stake in GrainCorp to almost 25 percent, but his ruling
effectively ring-fences GrainCorp from any takeover.
Shares in GrainCorp closed on Thursday at A$11.20, compared
to ADM's A$12.20 per share bid, or A$13.20 per share including
dividends payable by GrainCorp.
Analysts said GrainCorp shares were set to tumble once the
market opened on Friday given they had traded around A$8.70 per
share before ADM's initial approach and profits are coming off
record highs of a year or two ago.
"The problem now of course is the recent numbers from
GrainCorp look pretty scary, so my feeling is a downside on
GrainCorp is a lot lower than what it was trading at before this
was announced, so really bad news for shareholders," said
Shannon Rivkin, a director at Rivkin Securities.
Australia is the world's second largest wheat exporter and
GrainCorp is the largest listed grains company, handling
approximately one-third of the country's wheat production.
It dominates the country's east coast storage, distribution
and marketing of grains, owning seven of the 10 grain port
terminals and handling 85 percent of eastern Australia's
"We are disappointed by this decision," ADM Chairman and CEO
Patricia Woertz said in a statement. "We are confident that our
acquisition of GrainCorp would have created value for
shareholders of ADM and GrainCorp, as well as grain growers and
the Australian economy."
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
and had wanted GrainCorp to improve its access to fast-growing
The deal had previously been approved by Australia's
competition regulator and analysts had widely expected it to
But it had stoked divisions between the Liberal Party, which
is seen as pro-investment, and its junior partner, the
rural-based National Party, which opposed the deal.
National Party leader Warren Truss, who is also deputy prime
minister, was one of the most prominent figures to call on
Hockey to reject the deal, citing concerns over selling national
assets to foreign companies and decreased competition.
Only a handful of foreign investment deals are rejected by
Australian authorities each year and ADM's tilt at GrainCorp is
far from the first foreign deal in the agriculture sector.
Hockey said the deal was the only one of 131 significant
foreign investment applications that had been rejected since he
came to office.
ADM's interest in GrainCorp was part of a wave of
international interest in Australia's agricultural industry,
most recently in the dairy industry where Australia's
Warrnambool Cheese and Butter Factory Company Holdings Ltd
has sparked a bidding war.
ADM was advised by Citi and Barclays, while
Credit Suisse and Greenhill advised GrainCorp