By Rob Taylor
CANBERRA, Australia--U.S. agribusiness giant Archer Daniels
Midland Co. (ADM) moved to dampen political and grower opposition
in Australia to a planned acquisition of grain handler GrainCorp
Ltd. (GNC.AU), as a deadline nears for authorities to rule on the
3.0 billion Australian dollar (US$2.9 billion) deal.
ADM's offer is a litmus test for new Prime Minister Tony
Abbott's commitment to attract more foreign investment and
reinvigorate the country's $1.5 trillion economy as a decadelong
resources boom ends.
Australia's Foreign Investment Review Board, or FIRB, is due to
decide by Dec. 17 whether to approve the deal, shackle it with
conditions, or block it altogether. As part of that review, the
watchdog will decide whether the deal is in Australia's national
interest.
"We think that the GrainCorp business, the model, the way that
the management team have developed it and they operate it today, is
very good," ADM's grains head Ian Pinner told Australian state
radio Wednesday.
Australia exports about 70% of its food output, much of it to
Asia, which the United Nations believes will be an engine for world
food demand growth through 2050.
Trading houses have been pushing hard into Australia's grain
sector since the breakup of the government's central exporting
agency in 2008. A deal for GrainCorp would see 60% of wheat
shipments from Australia controlled by three companies--ADM,
Glencore Xstrata PLC (GLEN.LN) and Cargill Inc. It would also put
almost all of the country's export infrastructure under foreign
ownership.
Growers have expressed concern they could be hit by higher
grain-handling fees should the ADM purchase proceed. Opposition has
also come from the government's junior coalition member, the
rural-centered National Party, which fears the deal could hand
control of Australia's grains industry to foreign interests.
However, Mr. Pinner said farmers would benefit from wider access
to foreign markets through ADM's global network.
"We want to see the growers thrive," he said. "What we're
looking to do is bring additional benefits to growers through
investment in the infrastructure, through improving the supply
chain efficiency, and opening up this global market."
Most foreign investment deals are approved by Australian
authorities, especially those involving companies based in the
U.S., a long-time ally of the country. Still, some recent
acquisitions have drawn extra scrutiny from regulators or sparked
opposition from politicians.
Barnaby Joyce, now agriculture minister in Mr. Abbott's
government, was a vocal opponent of last year's sale of giant
Australian cotton farm, Cubbie Station, to a group including
China's Shandong RuYi Scientific & Technological Group Co.
Ltd.
Chinese investment in Australia is also in the spotlight as
state-owned Yanzhou Coal Mining Co. (YZC) bids for full control of
its Australian arm Yancoal Australia Ltd. (YAL.AU). That's despite
Yanzhou's earlier commitment to regulators to own no more than 70%
of the unit's equity.
"On foreign investment, I will not be bullied or intimidated by
anyone when it comes to dealing with the national interest,"
Australian Treasurer Joe Hockey, who oversees FIRB, said at a media
conference Wednesday.
Mr. Hockey is leaning toward approving ADM's bid for GrainCorp
with a range of conditions, including a cap on grain-handling fees
for Australian growers and competitor access to GrainCorp port
facilities and grain silos, the Australian Financial Review
newspaper reported Wednesday, citing government lawmakers. The
Treasurer's office declined to comment.
A green light could put Mr. Hockey at odds with cabinet
colleagues. Deputy Prime Minister Warren Truss, who leads the
Nationals, at the weekend buoyed opponents of the deal by appearing
to reject even a conditional sale, saying it was "very important
for Australia to maintain control of its own food security".
ADM's Mr. Pinner said his company respected the passion being
shown in Australia around agriculture and the GrainCorp assets,
reflected in recent surveys by the influential thin-tank the Lowy
Institute showing Australian are increasingly concerned about
foreign ownership of local assets, particularly by Chinese
buyers.
"We are not going to change the way GrainCorp operates, and in
fact we want to improve it," Mr. Pinner said of the company, which
handles much of the grain produced in Australia's most heavily
populated eastern states.
He rejected the notion that a deal would lessen competition, as
GrainCorp controlled only seven of 11 bulk terminals on the east
coast. One of those outside its control was overseen by Australia's
competition regulator.
"In addition to that, 25% of the grains and oilseeds that are
exported off the east coast go by container, 2-3 million tons a
year … not in bulk. So the competition is there," Mr. Pinner
said.
ADM intends to retain access to the ports for growers and retain
access to the up-country silos, as well as maintain local
management and a chief executive for GrainCorp, a condition likely
to be demanded by the government, Mr. Pinner said.
-Write to Rob Taylor at rob.taylor@wsj.com
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