GrainCorp Decision Bad Signal to Investors, Says Union Leader

Australia’s blocking of a $2 billion bid for GrainCorp Ltd. by Archer-Daniels-Midland Co. (ADM) sends a “terrible message” about investment in its farm sector, union leader Paul Howes said.

Treasurer Joe Hockey’s decision suggests the government is “beholden to special interests, old agrarian socialists in one part of the community,” Howes, national secretary of the Australian Workers’ Union, said in an interview today on Sky television. The move has also been criticized by the Business Council of Australia and the American Chamber of Commerce in Australia.

Shares in GrainCorp, Australia’s only publicly traded grain merchant, fell by the most since its 1998 listing on Nov. 29 after the U.S. company’s A$12.20 a share bid was blocked. The Australian dollar touched a two-month low of 90.56 U.S. cents as the decision raised concern investment flows into the country may slow.

“For Joe Hockey to make this decision is a terrible, terrible message for the rest of the world,” said Howes, whose union represents more than 135,000 workers and is a donor to the opposition Labor party. “Even I can see the sense in this deal going ahead.”

Prime Minister Tony Abbott, who declared the nation “open for business” in his victory speech after winning the election in September, holds power as part of a long-standing coalition which includes rural-based National Party members who had campaigned against the takeover. The party holds 15 seats in the 150-member governing House of Representatives and five in the 75-member Senate.

Abbott Comments

“I accept that some people have been anxious” about the blocking of the takeover, Abbott said at a media event in Brisbane today announcing Australia’s assumption of the presidency of the Group of 20 leading economies. “I doubt that there would be any other G-20 economy where a large foreign business would have been able to purchase an effective monopoly of a major industry.”

The decision is the third-biggest rejection of a foreign company by Australia, according to James Philips, head of mergers and acquisitions at Minter Ellison in Sydney. Royal Dutch Shell Plc had a A$6.5 billion bid for control of Woodside Petroleum Ltd. (WPL) blocked in 2001 and Singapore Exchange Ltd.’s A$8.4 billion bid for ASX Ltd. was rejected in 2011.

Climate Vagaries

Australia’s farm sector needs the investment of large diverse companies because the vagaries of the country’s climate risk undermining the finances of smaller companies during bad harvest years, Howes said today. ADM, based in Decatur, Illinois, is the world’s largest corn processor.

“The day of Ma and Pa farming in Australia needs to end,” he said, referring to family-owned farm businesses. “We need a transformation of that so we can have stability and long-term planning.”

The U.S. has been the biggest foreign investor in Australia each year since 2002, and Australia approved A$36.6 billion of deals involving U.S. investment in the 12 months to June 30, 2012, according to the most recent annual report published by the Foreign Investment Review Board, a government body. A total of 13 of 11,420 applications made to the board were rejected in fiscal 2012, all related to real estate deals, it said.

Other business groups have already criticized the decision. It “risks undermining the federal government’s statement that Australia is open for business,” the Business Council of Australia said in an e-mailed statement Nov. 29 attributed to Chief Executive Officer Jennifer Westacott.

It will have a real impact on American and foreign perceptions of Australia as a place to invest, Niels Marquardt, chief executive of the American Chamber of Commerce in Australia, was quoted as saying in the Australian Financial Review newspaper yesterday.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Stanley James at sjames8@bloomberg.net

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