Australia spurns ADM's $2.6B takeover of GrainCorp

Archer Daniels Midland's $2.6 billion takeover of Autralia's GrainCorp was rejected by the Australian government Friday, in a rare and surprising decision.

The rejection is a blow to an attempt by ADM -- which is more U.S.-focused than rivals Cargill, Bunge and Louis Dreyfus -- to improve its access to fast-growing Asian markets.'There is strategic importance to this industry,' said Peter Mavromatis, chief investment officer and portfolio manager at Beulah Capital. 'Australia, if it is indeed to become a food bowl to Asia... we'd like to keep control of quite significant assets in this area.'

GrainCorp shares plunged, losing a quarter of their value, as the rejection by Treasurer Joe Hockey effectively blocked Australia's last major independent grains handler from any takeover. 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 Prime Minister Tony Abbott in September elections.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.'Australian agriculture has been prevented from realising the potential benefits from the significant capital ADM would have invested in the long term future of the industry,' GrainCorp Chairman Don Taylor said.The deal had previously been approved by Australia's competition regulator and analysts had expected it to proceed.But it was unpopular with farmers and many voters and had stoked divisions between the Liberal Party and its junior partner, the rural-based National Party.'All the way along we wanted ADM to show us how growers would benefit and no one could,' said Dan Cooper, a farmer in New South Wales and committee chair at the NSW Farmers Federation.Farmers were skeptical of another foreign deal in the grains industry after Canadian agribusiness Viterra in 2009 purchased ABB Grain, then Australia's largest agribusiness. Many South Australian farmers have complained about higher prices and long waiting times to deliver grain.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. The last major foreign investment blocked was Singapore Exchange Ltd's $8 billion bid for ASX Ltd in 2011.Hockey said he was open to ADM -- one of the four 'ABCD' firms that have dominated the global agricultural business for decades -- increasing its stake in GrainCorp to nearly 25 percent. ADM said it would consider an increase.U.S. wheat has lost about a quarter of its value since ADM announced plans to buy GrainCorp in October last year. A rebound in global grain production is weighing on prices.

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