GrainCorp Falls on Report Australia to Veto Deal: Sydney Mover

GrainCorp Ltd., eastern Australia’s largest crop handler, fell the most in 15 months after a newspaper report that the nation’s premier may block the A$2.2 billion ($2.1 billion) takeover by Archer-Daniels-Midland Co.

GrainCorp slumped 4 percent to A$11.70 in Sydney, compared with Decatur, Illinois-based ADM’s A$12.20 a share bid. It was its biggest drop since Aug. 31, 2012. Prime Minister Tony Abbott is poised to veto the deal or impose conditions that would make it unviable, the West Australian newspaper said, citing ruling coalition lawmakers it didn’t identify.

The proposed takeover has sparked tension in Abbott’s ruling coalition with some members of the rural-based National Party, including Deputy Prime Minister Warren Truss opposing it on national interest grounds. Liberal Party-member and Treasurer Joe Hockey, who is due to rule on the proposal by Dec. 17 following a recommendation from Australia’s Foreign Investment Review Board, has said he wouldn’t be pressured by opposition to a foreign acquisition of GrainCorp.

“It’s a reflection of the long history of different philosophical positions from the members of the coalition,” said Stephen Stockwell, a political analyst at Griffith University in Brisbane, adding that some National Party legislators take a protectionist stance on the agricultural sector. “While it’s possible to paper over these things in opposition, the reality is that they are exacerbated when it comes to being in government and making decisions.”

The Foreign Acquisitions and Takeovers Act 1975 states only the treasurer can make a final decision on purchases by overseas entities, Gemma Daley, the spokeswoman for Hockey said by phone, declining to comment further. “These matters, as they always should be, are a matter for FIRB and the Treasurer,” the prime minister’s office said in an e-mailed statement today.

Singapore Blocked

GrainCorp’s share price has moved “in response to this media speculation,” over Hockey’s decision, the company said in a statement to Australia’s stock exchange. GrainCorp isn’t aware of any material information that hasn’t been previously disclosed to the market.

“It could be the source of further downside in the short term,” Stan Shamu, a Melbourne-based market strategist at IG Ltd. said by phone.

Should the deal be blocked, it would be the biggest such ruling since the government rejected the proposed takeover of the Australian Securities Exchange by the Singapore Stock Exchange. That cash-and-share deal was valued at A$8.4 billion when it was made in October 2010.

Truss said Nov. 3 that Australia, the world’s third-largest shipper of wheat, would lose out under the sale by relinquishing control of its food security. The deal also requires clearance from China’s Ministry of Commerce, as it will give ADM control over seven of the eight ports that ship grain in bulk from Australia’s east coast.

Grower Opposition

Growers’ groups from three Australian states met Nov. 14 with Foreign Investment Review Board and advisers to Hockey to raise concerns over the planned deal, said Brett Hosking, grains president for the Victorian Farmers Federation. Farmers are concerned that ADM may restrict access to ports, or raise fees for grain storage, he said.

“It just doesn’t appear to meet the national interest, in that there isn’t any benefit to growers,” Hosking, a farmer of wheat, barley and canola in Quambatook, in Victoria state, said today by phone. “It won’t even retain the status quo, the deal could hamper competition in the grains industry.”

If successful, ADM will seek to “operate in a competitive landscape where growers in eastern Australia have choices for storage and handling of their grain,” the company’s grains president Ian Pinner told a Senate inquiry in June.

Opponents of the deal are indulging in “pure fantasy” in believing Australia’s agricultural industry can grow without foreign investment, GrainCorp Chief Executive Officer Alison Watkins said Nov. 7 in a Sydney speech.

“For an industry that has relied on the rest of the world for so much of our demand and investment, we simply cannot afford to ditch an approach of proven success at this critical time,” she said.

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