GrainCorp Plans to Pay Dividend as ADM Deal Nears Completion

GrainCorp Ltd., the Australian crop handler that agreed to be bought for A$2.2 billion ($2.1 billion) by Archer-Daniels-Midland Co., expects to pay a 55 cent dividend before the deal becomes unconditional.

Shareholders will receive a dividend of 20 cents a share next month bringing the full-year payout so far to 45 cents and a further payment is expected to “be declared and announced by the GrainCorp board shortly before the ADM offer becomes unconditional,” the Sydney-based company said today when reporting a 31 percent drop in annual earnings. Under the terms of the deal, a total of A$1 in dividends can be paid.

ADM is seeking to conclude an offer to acquire GrainCorp for A$12.20 a share in the first three months of 2014. The transaction is subject to approval from Australia’s Foreign Investment Review Board and China’s Ministry of Commerce as it will give ADM control over seven of the eight ports that ship grain in bulk from the Pacific nation’s east coast.

GrainCorp was little changed at A$12.19 in Sydney trading.

Farmers are concerned the takeover will give ADM too much control over storage and export infrastructure, enabling it to raise fees and restrict access. Australia, the world’s third-largest shipper of wheat and beef, and the largest wool exporter, would lose out under the sale by relinquishing control of its food security, Deputy Prime Minister Warren Truss said Nov. 3.

Food Security

As an exporter of about two-thirds of the food it produces, “Australia, of any country in the world, has the least cause for concern about food security,” GrainCorp Chief Executive Officer Alison Watkins said today on a call with reporters and analysts.

Growers’ groups from three Australian states met today with the review board and lawmakers to raise concerns, said Wayne Newton, grains president for AgForce, which represents farmers in Queensland state. “This is as important to us as assets like electricity supply or telecommunications, they are absolutely critical,” he said.

The Senate Rural and Regional Affairs and Transport committee, which has urged regulators to examine the potential for the deal to distort Australia’s agriculture market, will seek new hearings on the takeover and issue a report on Dec. 11, it said today. Treasurer Joe Hockey, who will make a decision on approving the deal by Dec. 17, said this month he wouldn’t be pressured by opposition to a foreign acquisition of GrainCorp.

Grower Competition

“It’s important that debate about those matters is based on fact rather than emotion,” GrainCorp’s Watkins said. “There is plenty of competition for growers who want to sell grain.”

Net income fell 31 percent to A$140.9 million in the 12 months to Sept. 30, from A$205 million a year ago, missing the A$159.4 million median estimate of five analysts surveyed by Bloomberg. Earnings fell as receivals declined on lower grain production in eastern Australia and as a result of costs of A$18 million responding to Decatur, Illinois-based ADM’s proposal, GrainCorp said.

Drought in Queensland and frosts in parts of New South Wales and Victoria will contribute to a lower than average harvest in eastern Australia in fiscal 2014, Watkins said.

(Updates to add closing shares in fourth paragraph.)
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