| CHICAGO, April 30
CHICAGO, April 30 Moody's Investors Service on
Tuesday placed Archer Daniels Midland Co under review
for a ratings downgrade because of the agribusiness company's
plan to buy Australian grain handler GrainCorp Ltd for
A$3.0 billion ($3.1 billion).
GrainCorp's board, which rejected two earlier offers from
ADM during a six-month courtship, last week backed a revised
A$13.20 a share deal that included A$1.00 a share in dividends.
Moody's review of ADM will focus on the final cost of the
proposed transaction, the financing for the transaction,
"estimated synergies" and any potential asset sales that may be
required to secure regulatory approval, according to the ratings
High crop prices and capital spending by ADM mean the
company's "ability to generate free cash flow is less certain,
thereby making the financing of this transaction more
important," said John Rogers, senior vice president for Moody's.
ADM declined to comment on the move by Moody's.
ADM is one of four large players known as the "ABCD"
companies that dominate the flow of agricultural goods around
the world. The others are Bunge Ltd, Cargill Inc
and Louis Dreyfus Corp.
Moody's in December lowered its outlook for ADM to negative
from stable after the company raised an earlier bid for
GrainCorp. The ratings firm warned at the time it would place
ADM's ratings under review for a downgrade if ADM reached an
agreement on a purchase price.
ADM's A2 and Prime-1 ratings are under review and any
downgrade is likely to be limited to one notch, according to
ADM is due to issue first quarter earnings after the market
closes on Wednesday. The company is expected to announce that it
has completed a due diligence review of GrainCorp's finances and
will proceed with the takeover.
ADM has said it will provide more details about financing
for the deal after completing the due diligence process.
"I'd be pretty surprised if they didn't close up the book on
this and say they're moving forward," Morningstar analyst Jeff
In a report last month, Standard & Poor's Ratings Services
said a takeover of GrainCorp by ADM could "significantly weaken
credit measures if financed exclusively with debt."
The takeover bid is the latest move in the rapid
consolidation of the global grains sector amid intense
competition to feed fast-developing countries, and if successful
would boost ADM's international presence.
The deal will need regulatory approval.
ADM 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.