By Rob Taylor
CANBERRA, Australia--The government has yet to decide whether to
block or restrict a 3.0 billion Australian dollar (US$2.9 billion)
bid by U.S. agribusiness giant Archer Daniels Midland Co. (ADM) to
buy local grain handler GrainCorp Ltd. (GNC.AU), senior ruling
conservative sources said, following reports Prime Minister Tony
Abbott was set to veto the deal.
ADM's offer is a litmus test for the new conservative
government's commitment to attract more foreign investment and
reinvigorate the country's $1.5 trillion economy as a decadelong
resources boom ends. However, the deal has stirred concern among
some politicians and growers.
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.
"It's not [the prime minister's] decision, but in any case he
has not gone down any path yet," a senior government lawmaker close
to Mr. Abbott said Friday.
The West Australian newspaper earlier Friday reported that Mr.
Abbott was poised to reject the multi-billion takeover of
Australia's biggest agribusiness, bowing to political and grower
opposition to the deal. Mr. Abbott was inclined to block the
purchase or impose such onerous conditions on the deal that it
wouldn't be viable, the paper said, citing unnamed senior members
of Mr. Abbott's ruling Liberal-National coalition.
Mr. Abbott's conservative government was elected in September
vowing to ensure Australia was "open for business". Most foreign
investment deals are approved by Australian authorities, especially
those involving companies based in the U.S., a longtime ally of the
country. Still, some recent acquisitions have drawn extra scrutiny
from regulators or sparked opposition from politicians.
Deputy Prime Minister Warren Truss, who leads junior coalition
partner the rural-based 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".
But other senior conservatives spoken to by the Wall Street
Journal Friday rejected reports Mr. Abbott would intervene or veto
the deal.
"The process is for the Foreign Investment Review Board and the
Treasurer. There is no veto," said one who asked not to be named
given the political sensitivities around the deal.
While there had been furious lobbying by both supporters and
opponents of the deal as Parliament resumed this week for the first
time since the election, senior lawmakers said the prime minister
had given scant hint of his views on the takeover, which some east
coast grain growers argue will surrender control of Australia's
food security into foreign hands.
GrainCorp shares suffered their biggest fall in months in Sydney
trading Friday, falling as much as 6.4% to a seven-month low of
A$11.41. Offshore hedge funds have been betting on a successful
bid. GrainCorp shares, which struck a record high of A$12.82 in
April, were last down 4.0% at A$11.70.
Mr. Abbott earlier this week sketched out his broad thinking on
future foreign investment deals, saying in an interview with local
radio that he was more favorable to acquisitions that offered to
"build the farm", rather than simply selling an existing business
offshore. While he doesn't have direct power over individual
foreign investment decisions, his views likely go some way toward
influencing Treasurer Joe Hockey's decision.
"Our agricultural industry wouldn't be as strong as they are
without foreign investment. But it does have to be the right
investment, not the wrong investment," Mr. Abbott said at the
time.
ADM executives have promised to invest in infrastructure and
retain local management of GrainCorp, which critics say already has
a near monopoly on Australia's east coast. ADM said GrainCorp
controls only seven of 11 bulk terminals on the east coast. It
intends to retain access to the ports for growers and retain access
to the up-country silos.
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. Australia's previous Labor
government had ambitions to make the country a food bowl for the
region.
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 if the ADM purchase gets the green light.
"I think it's in the national interest to know the detail, to
know the funding arrangements," influential upper house Liberal
Senator Bill Heffernan, a trenchant critic of the deal, said
Friday. Mr. Heffernan said there were serious questions about how
ADM would handle business and tax affairs in Australia as well as
how it would use its power in the market.
Unveiling a 15 percent fall in net profit to A$175 million on
Thursday, GrainCorp Chief Executive Alison Watkins defended the
deal, adding that "Australia of any country in the world has the
least to be concerned about when it comes to food security".
-Write to Rob Taylor at rob.taylor@wsj.com
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