GrainCorp CEO Resigns After $2 Billion ADM Takeover Blocked

GrainCorp Ltd., eastern Australia’s largest grain handler, said Chief Executive Officer Alison Watkins resigned after a A$2.2 billion ($2 billion) takeover bid by Archer-Daniels-Midland Co. was blocked by Australia.

Chairman Don Taylor will become temporary executive chairman as GrainCorp seeks external and internal candidates to replace Watkins, the Sydney-based company said today in a statement. Watkins will join Coca-Cola Amatil Ltd., Australia’s largest publicly traded drink distributor, in March as group managing director.

GrainCorp will be seeking “someone with an agricultural background, particularly in the grains industry, who also has international experience,” Belinda Moore, an analyst at Morgans Ltd. said today by phone from Brisbane. “I expect there will be a continuation of the strategy” at GrainCorp.

Treasurer Joe Hockey blocked the takeover by Decatur, Illinois-based ADM last week on national interest grounds. Buying GrainCorp, the only major publicly-traded grain merchant left in Australia after the country deregulated its wheat-export system, would have given ADM control of 280 storage sites and seven of the 10 ports that ship grain in bulk from the nation’s east coast.

Australia’s Rejection

The decision was the first time a U.S. company has been blocked from buying Australian assets by the Treasurer and the third-biggest rejection of a foreign company by Australia, according to law firm Minter Ellison. Royal Dutch Shell Plc had a A$6.5 billion bid for control of Woodside Petroleum Ltd. blocked in 2001 and Singapore Exchange Ltd.’s A$8.4 billion bid for ASX Ltd. was rejected in 2011.

“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,” Prime Minister Tony Abbott told reporters in Brisbane Dec. 1.

ADM, the world’s largest corn processor, had agreed to buy GrainCorp for A$12.20 a share in April. GrainCorp fell 3.6 percent to A$8.41 in Sydney trading, the lowest since March 20, 2012.

GrainCorp’s market value climbed about 70 percent to A$1.9 billion today since the July 30, 2010, appointment of Watkins, a chartered accountant who previously worked at McKinsey & Co. and Australia & New Zealand Banking Group Ltd.

“You only have to look at Alison’s background in food and beverages, she’d fit perfectly” at Coca-Cola Amatil, Morgans’ Moore said.

Wheat Reliance

Previously CEO of beverage manufacturer Berri Ltd. when it was acquired by San Miguel Corp. in two transactions in 2004 and 2005, Watkins oversaw a strategy to reduce GrainCorp’s reliance on wheat, which can be volatile depending on Australia’s weather conditions.

“We didn’t expect the rejection of the transaction which happened last week, and that has put me in the position of needing to consider my future over the weekend and make this difficult decision to resign,” Watkins told reporters today on a media conference call. She will leave GrainCorp at the end of January.

Watkins joined GrainCorp a week after the grain handler announced a A$856 million acquisition of wheat exporter AWB Ltd., a deal thwarted four weeks later when AWB recommended a higher cash offer from Agrium Inc., the largest U.S. farm-products retailer.

Watkins will also stand down from the board of the Australia & New Zealand Banking Group Ltd. in April, the bank said in a separate statement.

Slower Pace

ADM had planned to invest as much as A$250 million in GrainCorp, focused mainly on improvements to its rail infrastructure, the U.S. company said in a Nov. 26 filing. Without the takeover, GrainCorp will likely need to move at a slower pace, Taylor said today on the same call. The company wants to improve infrastructure to boost earnings and tap rising demand in the Middle East, Asia and Africa.

“What was offered by ADM was an awful lot of money which went directly to that upgrade,” Taylor said. “Certainly we are going to have to spend some capital and our capital capacity is not of that order, so we are going to have to measure how we do that.”

GrainCorp’s storage and logistics division “will require some rationalization,” Taylor said, though he declined to offer specifics.

In a filing to confirm the withdrawal of its offer, ADM said it was disappointed by Australia’s decision.