Australia blocks US buyout of GrainCorp
Sydney (AFP) - The Australian government rejected Friday the Aus$3 billion ($2.7 billion) sale of GrainCorp to American agribusiness giant Archer Daniels Midland (ADM), saying it went against the national interest.
Treasurer Joe Hockey said the sector was still moving towards more robust competition and that a foreign takeover of the biggest grain handler in eastern Australia could undermine public support for foreign investment in general.
"Now is not the right time for a 100 percent foreign acquisition of this key Australian business," he said, a decision which sent GrainCorp shares diving 22 percent to Aus$8.72 at their close on Friday.
The bid met strong opposition from grower groups and the National Party, which is part of the governing coalition that declared Australia "open for business" after winning September elections.
"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community," Hockey said in a statement.
"I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally.
"This would not be in our national interest."
The Treasurer said the Foreign Investment Review Board assessing the proposal had been split on whether to green-light the takeover, which was "one of the most significant proposed acquisitions of an agricultural business in Australia's history".
But he had ultimately decided that Australia's grains export industry was still working through a significant deregulation process, which started in 2008 with the abolition of the single desk for wheat exports.
ADM owns more than 280 storage sites and seven of the 10 grain port terminals in New South Wales, Queensland and Victoria. Around 85 percent of eastern Australia's bulk grain exports are handled through its ports network.
Hockey said growers had expressed concern that the proposed acquisition would reduce competition and impede their ability to access grain storage, logistics and distribution networks.
ADM voiced disappointment at the decision to reject its proposal, a bid it had sweetened in recent days with an increased Aus$250 million spending on infrastructure.
"Today's events will have enduring implications that will be felt not only by our shareholders but by the entire industry," GrainCorp chairman Don Taylor said in a statement.
"Australian agriculture has been prevented from realising the potential benefits from the significant capital ADM would have invested in the long term future of the industry."
Hockey noted ADM's comments that it wanted to be involved in the Australian marketplace for the long term and said he would encourage it by allowing it to raise its shareholding in GrainCorp to 24.9 percent. It currently holds 19.85 percent.
Hockey rejected the suggestion that the government was not open for business.
"The fact of the matter is we need foreign investment, we welcome foreign investment but it's got to be investment that is not contrary to the national interest," Hockey said.
Prime Minister Tony Abbott backed his Treasurer, saying the proposal was the only one of 131 significant foreign investment applications dealt with by the government to have been blocked.
"The Treasurer has been guardian of our national interest," Abbott said.
Agriculture Minister Barnaby Joyce, a member of the National Party, also welcomed the decision which he said would help protect Australia's food security.
But the opposition Labor Party slammed the block, saying Hockey was too weak to stand up to division within the ruling coalition on the matter and the government's claims to lure investment to Australia were in tatters.
"A good treasurer does not come out and say it's in the national interest to block this foreign investment because it is not popular," said Chris Bowen, Labor's Treasury spokesman.
