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GrainCorp holds out for higher price from US ag trader

Sue Lannin reported this story on Thursday, December 20, 2012 18:50:00

SALLY SARA: Farming firm GrainCorp says it can't comment on corruption allegations surrounding a US food giant which has made a takeover approach.

Agricultural processor Archer Daniels Midland is offering nearly $3 billion for the Australian grain handler.

GrainCorp told investors at its annual general meeting (AGM) today that that amount is not enough.

Finance reporter Sue Lannin was at the meeting and joins me now.

Sue, what did GrainCorp shareholders have to say about the takeover approach from Archer Daniels Midland?

SUE LANNIN: Yes, well Sally, most shareholders in fact seem supportive of GrainCorp's stance that $12.20 a share is just not enough, and they seem to mainly agree with company for holding out for more.

Now ADM did say last week the offer was a substantial improvement on its first offer of $11.75 a share, but the company went through some of GrainCorp's achievements.

It had a record net profit in 2012 of $205 million, it's the biggest grain handler in eastern Australia, it produces 40 per cent of Australia's canola and refined edible oils, and very important, it's the fourth-biggest malt producer in the world, and of course that's used in making beer.

So I spoke to GrainCorp investors earlier today.

(to investor) What are the implications for Australia? GrainCorp is the sole remaining grain trader on the Australian stock exchange.*

INVESTOR: I think ADM will just manipulate the wheat price to the detriment of the Australian farmers.

At the moment, they're doing well with the northern drought, but when the northern hemisphere does a good crop, they'll give them preference in the sales to the Australian farmers.

SUE LANNIN: It is possible that the Foreign Investment Review Board could block any deal if it went ahead.

INVESTOR: Possible, but in my opinion, highly unlikely because of the Australia-US free trade agreements.

SUE LANNIN: Are you looking at selling out?

INVESTOR 2: Undecided. Just waiting for a better Asian offer.

INVESTOR 3: It does concern me, but there's not really anything we can do about it if they offer a high enough price for it.

SALLY SARA: That's investors at GrainCorp's AGM in Sydney today.

So Sue Lannin, what did the company have to say about the takeover move?

SUE LANNIN: Well, it did reiterate that $2.9 billion for GrainCorp is just not enough.

It's also said that it wasn't distracted by the approach, and also I want to point out that ADM at this stage has made no formal bid, it's just a takeover approach. They haven't lodged the documents.

ADM at the moment owns just under 20 per cent of GrainCorp.

So here's Don Taylor, GrainCorp's chairman.

DON TAYLOR: It's been an incredibly busy year. We've bought two businesses simultaneously on the same day, we've had a record harvest, we've had record earnings, we've had record almost throughout the businesses.

Now we've become the prettiest girl in town, and someone's made a proposal to us - a materially undervalued proposal, at this stage.

SALLY SARA: That's the GrainCorp chairman, Don Taylor.

Now, I understand Sue that there have been corruption allegations facing Archer Daniels Midland?

SUE LANNIN: Yes, now ADM has actually been investigating these concerns for a while, that its employees broke US laws prohibiting bribes to foreign officials in relation to grain and feed exports.

And in fact, it just made an update to the US share market saying it had completed an internal review and it's in discussions with US government agencies, and it says government agencies could impose criminal or civil fines.

Now I asked the chairman, Don Taylor, about that.

DON TAYLOR: We've had great support from our shareholders in terms of the approach we've taken and the rejection of the offers to date, so I'm very comfortable with where the company sits today.

SUE LANNIN: Mr Taylor, are you concerned about the corruption allegations facing ADM, and its own investigations of its employees?

DON TAYLOR: Oh look, that's not something that I'd involve myself in, that's really not for me to comment on.

ADM's a large publicly-listed American company, and I'm not going to comment on those things.

SALLY SARA: That's GrainCorp chairman, Don Taylor, speaking there to Sue Lannin.

*Editor�s note: (January 22) the story originally reported that GrainCorp was the last listed agricultural business on the stock exchange.