GrainCorp offers top Asia return as deal seen closing: Real M&A

Some government, shareholder opposition still in play

“Farmers should be happy to see that someone sees value in providing them services,” Michael Swanson, a Bloomington, Minnesota-based agricultural economist for Wells Fargo & Co., the largest U.S. farm lender, said in an e-mail. “Australia needs to export its excess grain given its limited domestic demand growth.”

The potential profit Australian farmers stand to make by gaining access to bigger markets in China and the rest of Asia from ADM’s global reach may be lost in the political debate over foreign ownership and concentration of power, said Nathan Kauffman, the Omaha Branch executive with the Federal Reserve Bank of Kansas City who tracks agricultural and rural economies.

“We cannot see merit in the arguments against the ADM transaction,” Jordan Rogers, an analyst in Sydney at Commonwealth Bank, said in a phone interview.

Still opposed

GrainCorp’s largest individual shareholder still opposes the deal, and ADM needs approval from holders of more than 50.1% of GrainCorp shares to proceed with the bid. The offer is open until Feb. 28.

The company needs “strategic foreign investment,” not a controlling overseas shareholder, Don Seaton, who owns a 2.2% stake, wrote in the Australian newspaper Nov. 18. Seaton, who sold his stake in oils processor Gardner Smith Group last year to GrainCorp in return for equity, said Australia should own what’s left of its agricultural infrastructure.

All the same, ADM has said the deal has been cleared by the European Commission and trade or competition bodies in the U.S., South Korea, Japan, Canada and South Africa. It still needs approval from China’s Ministry of Commerce.

The Foreign Investment Review Board assesses proposed takeovers on a case-by-case basis, said Malcolm Brennan, special counsel for King & Wood Mallesons who advises clients on Australia’s foreign investment policy. Brennan said he isn’t involved in ADM’s offer for GrainCorp.

“I view the risk of it being blocked as being relatively low,” Hulme at BBY said. “Anything can happen in politics but it doesn’t make sense to me to block the sale.”

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