ADM beats a retreat on GrainCorp

US grains giant Archer Daniels Midland is trying to sell its 19.85pc stake in GrainCorp, abandoning takeover ambitions.

GrainCorp was formed from the privatisation of the former grower-owned NSW Grain Elevators Board in 1992. Picture: Greg Scullin

US grains trading giant Archer Daniels Midland is attempting to sell its 19.85 per cent shareholding in Australia’s largest listed agribusiness GrainCorp (GNC), abandoning its $US3 billion ($3.9bn) ambitions to take over the dominant east coast grain, logistics, ports and export business.

The move follows the Turnbull government’s April rejection of the $370 million bid by Chinese company Shanghai Pengxin to buy the prized Kidman cattle ­station empire, dashing ADM’s hopes that Malcolm Turnbull was more open to foreign agricultural ownership than his predecessor as prime minister, Tony Abbott.

It is believed the increased political clout of the Nationals within the Coalition government after the July 2 federal election result was the final straw for ADM.

Barnaby Joyce, the Nationals leader, Deputy Prime Minister and Agriculture Minister, has been an outspoken critic in the past of ADM’s desire to seize full control of GrainCorp.

“It would give vast power to a single global entity and has the ­capacity to exploit Australian growers by monopolising crucial infrastructure,” Mr Joyce said in 2013 when still in opposition.

ADM last night put its hefty share package up for grabs “off-market” in a so-called Dutch auction through adviser Lazard with brokers Goldman Sachs, UBS and Morgan Stanley competing to place the stake in the market.

But the sale process flopped amid weak investor demand for the parcel. Sources said investors were not prepared to pay a high price for the entire 20 per cent stake, suggesting ADM would have to sell at a bigger discount to the market or retain some stock.

ADM’s aborted attempt to sell any of its stake could put the stock under pressure today as the US group’s intentions to exit GrainCorp are now clear. As questions mount over the structure of the mooted selldown, some investors argue ADM’s holding is likely to create an overhang in the stock.

At GrainCorp’s closing price of $8.64 a share yesterday, ADM’s stake is valued at about $392m and the company at just $2bn.

It is expected West Australian farmer-owned grain co-operative CBH Group, which has been looking to increase its control and involvement in grain handling and trading in the eastern states, will be a key bidder.

That would represent a turning of the tables on GrainCorp, which is part of a consortium ­attempting to buy a stake in CBH to diversify away from its reliance on the competitive east coast grain export market.

ADM’s original $3.4bn takeover bid for GrainCorp was ­vetoed in November 2013 when then treasurer Joe Hockey, under pressure from the Nationals and rural Liberals, ruled the bid as contrary to the national interest.

The Foreign Investment Review Board cited concerns about foreign control of key infrastructure such as Australia’s ports and the strategic domination of the grain trade by a foreign company if the takeover was approved.

Mr Hockey later also claimed ADM was a global corporation “not of good character”.

GrainCorp was formed from the privatisation of the former grower-owned NSW Grain Elevators Board in 1992.

It now owns 180 country silos and grain storage bunkers in NSW and Victoria, seven east coast loading ports, 43 trains of its own and boasts a total grain storage capacity of up to 20 million tonnes. It is Australia’s largest supplier of flour, the fifth-biggest malt producer, and exports grain, flour, oils and other products to 30 countries, and in total controls more than a third of Australia’s $8bn grain exports.

In late 2013, ADM offered to buy all GrainCorp’s shares at $13.20, a premium of 49 per cent to the pre-bid price.

After the bid was blocked, GrainCorp shares fell back and have been trading around $8 for the past two years, despite ADM holding its stake amid persistent rumours of a second bid.

But the growing power of Mr Joyce and the Nationals, which claims to represent the concerns of farmers and rural Australians about the creeping foreign ownership of farm land and agriculture businesses, appears to have led to ADM’s decision to quit Australia.

Mr Joyce recently said the government had blocked “what is right” when rejecting both ADM’s earlier takeover bid and the most recent Chinese offer for the Kidman cattle company.

“People clearly know my views and my preference is always for the Australian people to be owner of the Australian asset,” Mr Joyce said earlier this year.

“I’ve stood behind those decisions in the past — in Cubbie Station where we lost (the vast cotton property in Queensland was sold to China’s Shandong Ruyi); with ADM where we won; and with Kidman & Co where … I fully supported the Treasurer’s decision to block it. We do need foreign investment in agriculture in Australia but you won’t get anybody interested in investing in agriculture in the long term if producers are getting exploited.”

GrainCorp last night said it was aware of a process being conducted but could not comment on ADM’s intentions.