ADM Acquisition in Australia Really Aims at Growth in Asia

Agribusiness giant Archer Daniels Midland Co. (NYSE: ADM) has bid $2.8 billion for Australian grain grower and marketer GrainCorp. According a press release from GrainCorp, the offer is a nonbinding offer at AUS$11.75 a share (about US$12.13), a premium of 33% to GrainCorp’s closing price on Friday.

ADM acquired 10% of Graincorp on Friday to add to the 4.9% stake it already held in the Australian firm. ADM’s CEO said then:

Our investment in GrainCorp is part of our ongoing portfolio management and is consistent with our strategy of growing our Agricultural Services and Oilseeds businesses by investing in key supply regions outside the United States.

GrainCorp offers grain storage and logistics services, farming and marketing services. ADM is eyeing the company for its proximity to Asian and Middle Eastern markets.

If ADM is able to pull this off, it would be a really sound deal for the company. But “if” is a big word, and it’s fairly likely that at least one other bid will surface for GrainCorp. Shares of GrainCorp rose nearly 40% on the report, which indicates that ADM’s premium will not be sufficient to get the deal done. Privately held U.S. agribusiness firm Cargill Inc., Bunge Ltd. (NYSE: BG), Singapore-based Wilmar International and commodities trading houses in Europe and Asia could also jump in.

ADM’s shares are down about 0.5% at $28.37 in early trading this morning, in a 52-week range of $25.02 to $33.98.

Paul Ausick