Treasurer Joe Hockey has rejected the US company Archer Daniels Midland’s A$3.4 billion bid for the Australian agri-giant GrainCorp, giving the Nationals their first big victory in the Abbott government.
Hockey, announcing his decision before the markets opened, said the Foreign Investment Review Board had been split on the bid, satisfactory conditions could not be worked out, and approving the bid could undermine support for foreign investment.
But he has encouraged ADM to increase its shareholding to build shareholder support for a potentially bigger role in the Australian industry.
Labor attacked the decision, saying Hockey had put politics before economics. Shadow treasurer Chris Bowen said “Today Joe Hockey said Australia is not open for business. [He] has sent a message to foreign investors that he is a weak treasurer”.
Pre-empting the criticism that his decision contradicted Tony Abbott’s election night message that Australia was now “open for business” under the Coalition, Hockey said that of more than 130 significant foreign investment bids, this was the only one rejected.
He said about 85% of eastern Australia’s bulk grain exports were handled through the GrainCorp ports network.
“Many industry participants, particularly growers in eastern Australia, have expressed concern that the proposed acquisition could reduce competition and impede growers’ ability to access the grain storage, logistics and distribution network,” he said
Given the transition to a more competitive network was still emerging, “now is not the right time for a 100% foreign acquisition of this key Australian business.”
A “further significant consideration” was that the proposal had attracted a high level of concern from stakeholders and the broader community.
Allowing the bid to proceed “could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally”.
He had carefully examined the option of conditions but considered “there are no appropriate conditions that would mitigate the national interest concerns associated with the proposed acquisition”.
Imposing conditions would have meant more regulation for one market participant and this would not be in the interests of the Australian grains industry.
“Moreover, imposing enduring conditions on just one participant, one company in a changing industry, would limit the capacity of that company to respond to the changing environment.”
ADM had advised him it wished to be involved in the Australian market place for the long term. It currently owned 19.85 % of GrainCorp. It had been open to him to cap its shareholding at the current level but he had decided not to do so.
To encourage ADM to demonstrate its commitment to the Australian industry he was inclined to approve any proposals from ADM to increase its shareholding up to 24.9%.
“This would also provide a platform for ADM to build shareholder support for potentially greater participation in the Australian industry as it develops.”
Recently ADM made a last minute offer of $200 million for additional investment and promised price caps for handling fees in an attempt to improve its chances.
ADM chairman Patricia Woertz said: “We are disappointed by this decision. We are confident that our acquisition of GrainCorp would have created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy.”
Deputy Prime Minister and Nationals leader Warren Truss, who has been a trenchant critic of the bid, welcomed the decision, saying while the government strongly supported foreign investment “not all foreign takeovers are in the national interest.
"I welcome the fact that Australia will continue to have a major locally-owned company dedicated to furthering the interests of the Australian industry.”
Agriculture Minister Barnaby Joyce said: “I believe it is firmly in the national interest to make sure one of Australia’s greatest agricultural assets GrainCorp remains as predominately Australian owned.”
The Greens also welcomed the decision, as did Clive Palmer.