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Analysts say it's unlikely ADM will make second bid for GrainCorp

July 29, 2016
Consumer Packaged Goods

Following a failed attempt to sell its stake in GrainCorp, market analysts say it’s highly unlikely Archer Daniels Midland Co. (ADM) will make another offer for the Australian grain company.

According to reports, ADM attempted to sell its 19.85% stake in GrainCorp on July 26 in a “Dutch auction” run by advisory firm Lazard. The asking price was about $8, but offers came in too low at $7 per share, Australian media reported.

Chicago, Illinois, U.S.-based ADM has not commented on the sale or its future intentions in regard to GrainCorp. ADM bought its stake in GrainCorp in 2012 before making a $3 billion takeover bid for the company in 2013. Although the deal received several regulatory approvals, Australian Federal Treasurer Joe Hockey prohibited the acquisition.

GrainCorp Chief Executive Officer Mark Palmquist on July 27 said he didn’t know why “ADM was trying to reposition their ownership.” Palmquist was part of a panel discussion at the Australian Grains Industry Conference (AGIC) and answered questions about the attempted sale.

He said GrainCorp would concentrate on running its strategy of diversification.

“We’ve got a good strategy of diversification that has been working well for us, particularly with the smaller crops we’ve had in Eastern Australia,” Palmquist said during the AGIC event. “If we didn’t have our diversified strategy, it would have been a difficult struggle for us.”

Australian media reported that investment bank Macquarie Capital was working on a deal between GrainCorp and ADM prior to ADM’s attempt to sell its GrainCorp shares. The plan allegedly was for the investment bank to buy GrainCorp’s ports and silos while ADM would purchase the remaining assets, The Australian reported.

It is understood that ADM’s decision to sell its shares was because it had chosen not to pursue the Macquarie proposal, The Australian reported.

The proposal would have gotten around one of the sticking points in ADM’s original offer for GrainCorp – ownership of 280 grain storage facilities and seven of 10 grain port terminals in eastern Australia.

In his rejection of the proposal, Hockey said industry participants, particularly growers, were concerned the deal would have reduced competition and impeded growers’ ability to access the grain storage, logistics and distribution network.

“Given that the transition toward more robust competition continues and a more competitive network is still emerging, I consider that now is not the right time for a 100% foreign acquisition of this key Australian business,” Hockey said in 2013.

Source: World Grain

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