Joe Hockey rejects proposed takeover of GrainCorp by US company Archer Daniels Midland

GRAINCORP has warned that Joe Hockey's rejection of a US takeover will have "enduring implications" for Australian agriculture.

GRAINCORP has warned that Joe Hockey's rejection of a US takeover will have "enduring implications" for Australian agriculture, as the Treasurer was hailed as a "guardian" of the national interest.

In a surprise move today, Mr Hockey ruled against the $3.4 billion sale of the Australian grains handling company to US foods giant Archer Daniels Midland, sending GrainCorp's share price plunging.

The Nationals, who campaigned heavily against the full takeover, welcomed the decision, saying a strong locally-owned GrainCorp was vital to the nation's food industry.

But Labor said Mr Hockey's decision sent a message to investors across the world that Australia is closed for business.

Shares in GrainCorp slumped more than 25 per cent or $2.89 each to $8.31 when they began trading shortly before midday and by late trading were down 22 per cent at $8.73 each.

GrainCorp said it was extremely disappointed at the decision by Mr Hockey, who concluded there was insufficient competition in the sector to allow the takeover to go ahead.

“Today's events will have enduring implications that will be felt not only by our shareholders but by the entire industry,” GrainCorp chairman Don Taylor said in a statement.

“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.”

ADM, which also expressed its disappointment at the decision, will be able to expand its 19.85 per cent stake in GrainCorp, but only to 24.9 per cent.

The Prime Minister defended the decision.

“The Treasurer has been the guardian of our national interest,” Mr Abbott told reporters.

“And I want to make it crystal clear we are open for business. We are open for foreign investment but it has to be foreign investment that accords with our overall national interest.”

Opposition treasury spokesman Chris Bowen accused Mr Hockey of caving in to the Nationals, showing himself to be a “weak” Treasurer who would not take politically difficult decisions to ensure the nation's prosperity.

“Today Joe Hockey has sent a message to everybody who is thinking of investing in Australia. And that message is, `I'll only tick it off if it passes the popularity test',” he said.

“Today, Joe Hockey said Australia is not open for business. The claims by this government that they would lure back investment into Australia lie in tatters this morning because Joe Hockey is too weak a Treasurer to do the right thing by Australia.”

Mr Hockey's decision avoids a damaging split between the Liberals and the Nationals, but risks a backlash from the business sector and free-market advocates within the Coalition, who had argued the sale should go ahead.

Mr Hockey said he made the decision after “long and careful deliberation”, concluding there was insufficient competition in the sector to allow the takeover to go ahead.

He said allowing the sale to proceed risked undermining public support for the foreign investment regime.

Mr Hockey maintained Australia welcomed foreign investment.

“In fact, of the 131 significant foreign investment applications we have dealt with, this is the only application we have prohibited,” he said.

“The fact is we need foreign investment, we welcome foreign investment. But it has to be foreign investment that is not contrary to the national interest.”

Mr Hockey had been expected to approve the takeover while attaching strict conditions.

But the Treasurer said he had decided against allowing a conditional takeover, as it would have impeded the company's ability to compete in the market.

The Nationals were today celebrating the decision. Agriculture Minister Barnaby Joyce said it would protect Australia's food industry at a time when demand was about to explode.

Mr Joyce said growers would have been paid poor prices for their grain if the ADM bid had been approved.

“It is without dispute that if ADM had been allowed to get control of 90 per cent of grain receival sites (on the east coast), control of the railway slots, the major ports and shipping as well being the end purchaser of the product, it would have left Australian growers in an invidious position and obviously the receiver of the poorest prices,” Mr Joyce told The Australian.

Mr Joyce said he understood GrainCorp might be disappointed.

“But in a world where in the next 50 years the human population will consume more food than ever before in its history, it is important that Australia is not only the venue where the food is grown, but also the beneficiary of the marketing of that product.”

Mr Hockey said the proposed acquisition was one of the most complex undertaken by the Foreign Investment Review Board, which could not come to a consensus view on the sale.

He said GrainCorp's ownership of more than 280 grains storage facilities and seven of 10 grain port terminals in the eastern states made it a huge market player.

“Given that the transition towards more robust competition continues and a more competitive network is still emerging, I consider that now is not the right time for a 100 per cent foreign acquisition of this key Australian business,” he said.

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

“I therefore judged 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.”

Mr Hockey said he had taken into consideration the concerns of grain growers in eastern Australia that the acquisition could reduce competition and impede their ability to access the grain storage, logistics and distribution network.

Mr Abbott said Mr Hockey had made his decision conscientiously, in light of community division on the issue and the inability of the FIRB to make a unanimous recommendation.

Mr Hockey made the announcement at 8am (AEDT), while the markets in Australia and the US were closed.

He said his decision was made in the full knowledge of ADM's enhanced takeover offer, made public earlier this week.

ADM had added $250 million to its bid, unveiling a package including increased spending on GrainCorp's storage and logistics business.

It also committed to price caps on grain handling charges at ports and silos and access to grain infrastructure for growers and third parties, and an open access regime for ports.

The new commitment included $200 million focused on improving rail infrastructure including new grain wagons, and a proposal to establish a rail infrastructure fund seeded by ADM and the ability to take matching funds from the Commonwealth as well as money from other governments and individual investors.