* S&P affirms 'A' rating, with negative outlook
* GrainCorp deal could bring earnings growth in years ahead
By Tom Polansek
CHICAGO, May 3 Standard & Poor's Ratings
Services said on Friday that Archer Daniels Midland Co's
planned A$3.0 billion ($3.1 billion) acquisition of Australia's
GrainCorp Ltd should yield benefits for the U.S.
agribusiness company in the coming years.
S&P removed ADM, one of the world's top grain traders, from
its watch list for a potential ratings cut and affirmed an 'A'
corporate credit rating.
The agency said it still has a negative outlook for ADM,
"reflecting our expectations for continued weaker credit
measures once the transaction is complete" and uncertainty about
the size of the U.S. harvest later this year.
S&P first put ADM on the watchlist in October when ADM made
an initial bid for GrainCorp.
The GrainCorp acquisition is expected to pay off in the
longer run because it will expand ADM's global footprint and
give it an important foothold in the rapidly-growing Asian
market, according to S&P.
"Although ADM participates in a challenging industry
characterized by volatile commodity prices, we believe
management's ongoing capital investments in its core business
lines will generate meaningful earnings growth over the next
several years and increase geographic diversity, which should
help offset inherent earnings volatility," the agency said in a
ADM, which on Wednesday reported lower-than-expected
earnings for the quarter ended March 31, has declined to comment
about ratings reports.
Moody's Investors Service on Tuesday placed ADM under review
for a ratings downgrade because of the proposed deal. High crop
prices and capital spending mean ADM's "ability to generate free
cash flow is less certain," Moody's said.
ADM is one of the four so-called "ABCD" players that
dominate the flow of agricultural goods around the world, along
with Bunge Ltd, Cargill Inc and Louis Dreyfus
ADM Chief Executive Patricia Woertz said on Wednesday the
company could "easily finance" its sweetened A$13.20 a share
offer for GrainCorp that includes A$1.00 a share in dividends.
ADM included an extra dividend of 3.5 cents per share a
month from October if regulatory approvals lagged beyond the
start of that month.
S&P predicted the deal will be completed in early 2014.
The takeover, which needs regulatory approval, is the latest
move in the consolidation of the global grains sector amid
competition to feed fast-developing countries like China.