Archer Daniels Midland has tried to win the support of wary Australian farmers as its offer to buy GrainCorp faces intensifying political scrutiny in Canberra

November 27, 2013 4:51 am

ADM seeks to win over Australian farmers

By Gregory Meyer in New York

Archer Daniels Midland has tried to win the support of wary Australian farmers as its offer to buy GrainCorp faces intensifying political scrutiny in Canberra. The measures – new infrastructure spending and a temporary cap on handling fees – promised to wary Australian farmers illustrate the importance of the A$3.4bn ($3.1bn) takeover for the agricultural trader’s plans to broaden crop supplies away from the US. GrainCorp is the largest grain handler in eastern Australia.The deal won the approval of GrainCorp’s board in April but faces questions from farmers suspicious of a foreign grain handler. Joe Hockey, the Australian Treasurer, has said he will decide whether to approve the takeover by December 17.

ADM’s new package, announced early Wednesday Sydney time, includes commitments to invest an additional A$200m in Australian agricultural infrastructure, especially railways, and cap rises in grain handling charges at silos and ports for three years.

Ian Pinner, ADM grain president, said: “These investments and commitments – developed following extensive input from Australian stakeholders – will help ensure the GrainCorp network remains an attractive option for growers and third-party grain traders, and also remains a competitive source for global grain buyers.”

GrainCorp shares rose 5.1 per cent to A$11.75 on the announcement. ADM in April agreed to pay shareholders A$12.20 per share in cash, plus a one-time A$1.00-per-share special dividend, before the deal closes.

To proceed, ADM still needs the approval of Australia’s Foreign Investment Review Board, which advises Mr Hockey, and China’s Ministry of Commerce. ADM is one of the world’s biggest traders of agricultural commodities but Patricia Woertz, chief executive, wants to diversify its assets beyond the US.

Australia is usually the world’s third largest wheat exporter, after the US and Canada, and is close to growing markets in Asia and the Middle East.

GrainCorp was formed in 1916 as part of the government of New South Wales and privatised in 1992. Some members of parliament want the company to stay in Australian hands.

“GrainCorp is to Australian agriculture what BHP is to our mining and resources sector and we should not so readily part with our iconic local assets,” Don Seaton, a large GrainCorp shareholder, wrote in The Australian newspaper last week.

ADM said the new commitments would bring its total added capital investment in GrainCorp to A$250m, or “a 100 per cent increase in GrainCorp’s original A$250m capital expenditure budget prior to ADM’s proposal.”

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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