Government rejection of GrainCorp takeover by US company Archer Daniels Midland 'weak', Opposition says

Updated

The Federal Opposition has labelled the Government's decision to reject the sale of GrainCorp to American agribusiness Archer Daniels Midland as "weak" and "pathetic".

Announcing the decision this morning to reject ADM's $3.4 billion bid for the eastern grain handler, Federal Treasurer Joe Hockey said he had to take into account the national interest.

"I consider that now is not the right time for a 100 per cent foreign acquisition of this key Australian business," he said, adding that the industry was "going through transition and now is not the right time to have all the major players foreign owned".

"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community," he said.

"I therefore judge that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. This would not be in our national interest."

Read the Treasurer's full statement here.

However, Opposition treasury spokesman Chris Bowen said Mr Hockey had failed his first big credibility test as Treasurer, and suggested he had been "bullied" by his Coalition partners and Cabinet colleagues into rejecting ADM's bid, with profound consequences.

Mixed message on foreign investment

Joe Hockey says Australia is still open for business, but it seems some customers are more welcome than others, Joe Hockey says Australia is still open for business, but it seems some customers are more welcome than others, writes business editor Peter Ryan

"This decision by the Treasurer means that Australia will miss out on investment it should have received - jobs won't be created that should have been created and the Australian economy will be worse off because of Joe Hockey's decision," he said.

ADM's bid was strongly opposed by the National Party and some country Liberal MPs in the eastern states, as well as grower groups, making the decision on GrainCorp an early test of unity for the new Coalition Government.

Mr Bowen said the decision showed Mr Hockey was "too weak a Treasurer to do the right thing by Australia" and to "stand up to people in his own government".

"If you want to ensure Australia's food security, then you ensure investment in Australia's food and agricultural industry," he said.

"Whether that investment be foreign investment or domestic investment, you ensure investment."

Mr Hockey described the proposed sale to ADM as "one of the most complex cases to come before FIRB [Foreign Investment Review Board] and it is one of the most significant proposed acquisitions of an agricultural business in Australia's history".

GrainCorp shares, suspended to allow investors to digest the news, plummeted by 26 per cent when trade resumed; at 11:50am the share price was $8.34.

ADM and GrainCorp have released separate statements expressing disappointment in the decision, although an ADM spokeswoman says the company will not challenge the decision.

"The process includes an ability to make an appeal - it is not something we will do," ADM's Victoria Podesta told The World Today.

In a statement, ADM Chairman and CEO Patricia Woertz said: "We are confident that our acquisition of GrainCorp would have created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy."

Ms Woertz said ADM worked constructively throughout the process to create an arrangement that would be in Australia's best interests and made "substantial commitments to address issues that were important to stakeholders".

GrainCorp's Chairman Don Taylor warned that the decision would "have enduring implications that will be felt not only by our shareholders, but by the entire industry".

"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," he said, adding that GrainCorp had "remained focused throughout the proposed takeover on the profitable operation of GrainCorp's businesses and its strategic assets".

However, he said, "The Board remains confident in GrainCorp's ability to continue to implement our long-term strategy, underpinned by our program of strategic growth initiatives and strong market fundamentals."

Responding to Mr Hockey's comment this morning that he will allow ADM to increase its shareholding in GrainCorp to 24.9 per cent, Ms Podesta said, "We will certainly consider what our options are. It's too early to have formed an opinion on that but it's certainly something we'll consider."

Ms Woertz said, "As owner of 19.85 percent of GrainCorp, we will look to work with them to maximise returns on our investment and create value for both companies."

Meanwhile, the chief executive of the American Chamber of Commerce in Australia, Niels Marquardt, said the decision sent a "negative" signal to foreign investors considering entering the Australian market.

"It send the signal that it's quite possible to invest significantly in this country in important sectors and at the end of the day come up short when trying to make an acquisition," he said.

Farmers, Minister welcome decision, despite lost funding

A vocal opponent of the bid, the Agriculture Minister and Deputy Nationals Leader Barnaby Joyce has welcomed the Treasurer's decision.

"Overwhelmingly people wanted this rejected and in the end they wanted it rejected not only in regional areas but in polls that were had in urban areas aswell," Mr Joyce said.

Sorry, this video has expired Video: Barnaby Joyce backs GrainCorp decision (ABC News)

Mr Joyce said Mr Hockey handled the issue very professionally and never once gave an indication what his decision would be.

Mr Joyce said he hasn't spoken to Mr Hockey today but he imagines he will and "it's not a case of gloating about the decision".

The Deputy Prime Minister and Nationals Leader Warren Truss said that after an "intense" debate he was pleased the bid had been blocked.

He, too, was careful not to claim victory for the National Party, instead characterising the outcome as "a good decision for Australia".

"It does demonstrate that there are checks and balances in place," he said.

"I've always been concerned that this was a takeover that was going to deliver very little value to the Australian grain industry but would whittle away our capacity as a nation to make decisions about our own food supply chain and our capacity to grow our export markets."

Independent Senator Nick Xenophon, meanwhile, welcomed the decision as a win for Australian grain producers and the country's foreign investment strategy.

Victorian Farmers Federation Grain Group President Brett Hosking, meantime, said Mr Hockey had made the right decision.

"The offer brought with it potential risk to growers... certainly our industry needs further investment, further capital, but the risk factor that came with this offer was just too great in light of what was being offered," Mr Hosking said.

The rejection means grain growers will miss out on a $200 million infrastructure upgrade that ADM was offering.

"While that extra investment would have been greatly welcomed and vastly appreciated, we're certainly not dealing with a broken down system by any means so business will continue as usual," Mr Hosking said.

Mr Hosking said despite the rejection, there is scope for foreign investment in the industry.

"What we're saying is that foreign investment into our industry needs to be done right and in this instance Mr Hockey's made the right decision," he said.

Sorry, this video has expired Video: US farm union warns against Graincorp sale (ABC News)

One of the oldest farm organisations in the US earlier this month warned that increased concentration in the industry would be bad news for Australian farmers.

The National Farmers Union said it had watched the negative impact of foreign takeovers in its own country.

"Any time a group of companies, or one or two companies, corner a market and infiltrate it by 40 to 60 per cent, economists will tell you you've lost competition," Chandler Goule from the National Farmers Union told the ABC.

"And as you lose competition, then what happens to your producers is they're limited on who they can sell to, therefore they get a lower price and your end users are limited on who they can purchase from."

Hockey defends work on foreign investment

Mr Hockey's announcement comes weeks before the deadline for the government to make a decision and days before a revived Senate inquiry was set to recall ADM for questioning.

He said ADM's bid, made before the Coalition came to power but not ruled on by the previous government, was one 131 foreign investment proposals considered by the current Government, and the only one so far rejected by him.

Sorry, this video has expired Video: Deputy PM Warren Truss reacts to GrainCorp announcement (ABC News)

"I've made decisions on a number of foreign investment proposals, and those decisions have facilitated a significant amount of new and welcome foreign investment in Australia," he said.

"In fact, of the more than 131 significant foreign investment application s we have dealt with, this is the only application that we have prohibited."

Mr Joyce also defended the Government's decisions on foreign investment.

"What we've seen is in excess of 130 foreign investment review board decisions and only one rejected under this current government. That's less than 1 per cent rejected," he said.

"I think that if you were getting better than 99 per cent success rate, you should be pretty happy with that. To be honest I think it would be rather peculiar if you never rejected anything."

Mr Bowen described as "pathetic" Mr Hockey's attempt to mitigate the ADM decision by pointing to how many investment bids his Government had approved.

"Those 130 would be much more modest invents, much more modest investments... much less controversial investments," he said.

Mr Hockey, meantime, revealed the FIRB had been unable to reach "consensus" on whether to accept ADM's proposal.

"When I asked them to consider a whole range of additional issues, particularly relating to the national interest, they were split and I made the call," he said.

Topics: agribusiness, industry, company-news, business-economics-and-finance, globalisation---economy, economic-trends, food-and-beverage, markets, trade, rural, agricultural-prices, agricultural-crops, wheat, takeovers, united-states, australia

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