Ag interest stirred

30 Apr, 2013 11:37 AM
Comments
6
 

AS GrainCorp looks likely to be swallowed up by US commodities company Archer Daniels Midland, attention is turning to which agribusiness could be the next takeover target, with animal feed provider Ridley Corporation heading the list.

Australian agribusiness stocks are in focus after GrainCorp finally backed ADM's $2.8 billion takeover offer. The move on GrainCorp followed foreign acquisitions of other agribusiness majors in recent years including AWB and ABB Grain.

Ridley, which sold its Cheetham Salt business last year to Hong Kong-based CK Life Sciences, was the next potential target, Commonwealth Bank analyst Jordan Rogers said. He also nominated Bega Cheese as having attractive assets.

Ridley has been a takeover target of GrainCorp. The stockfeed maker rejected GrainCorp's $415 million offer in 2008.

BBY analyst Dennis Hulme said Ridley would be attractive to international grain traders such as ADM as it had relationships with some of its final customers.

At the same time, companies such as Bega, which has assets in Victoria and southern New South Wales, were well positioned to tap into the growth in the demand for dairy in Asia, analysts said.

''What China is very low on in consumption per capita is dairy,'' one analyst said.

''And it's growing rapidly, and Australia and New Zealand are the two lowest-cost producers of dairy products.

''Bega Cheese is majority owned by dairy farmers so we don't think they are a takeover target in the short term … but in the longer term, there are assets that would be desirable for an Asian food company or an international dairy company.''

More generally, food production needs to increase by 70 per cent by 2050 to meet global demand, the UN's Food and Agriculture Organisation estimated in a report.

''The security of supply is a big issue. This is not a new theme, but it's accelerating as populations are growing faster and resources are fixed,'' another analyst said, adding that breads and spreads supplier Goodman Fielder was another possible takeover candidate.

Dairy producer Warrnambool Cheese and Butter was also seen as desirable.

SMH
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READER COMMENTS

rcg
30/04/2013 5:56:03 PM

Since everyone is in the mood for takeovers, I wish someone would "takeover" my vineyard - & leave a large dollop of dosh in my bank account! It would save me from being "bent-over" for another year or six!
ecnerwal
30/04/2013 8:23:47 PM

If so many Australian food and grain businesses are so financially attractive takeover targets, why is the Australian farmer who produces the raw materials for them in such a poor financial state? Also with predicted population growth nearby and increasing demand for food, why is it that our farming industries are trading so poorly that banks are reluctant to finance them? Demand is strong yet our suppliers are going out of business. It is not because they are bad at their job. It must be that producers costs are carrying the burdens of wasteful Govt costs. Wake up Govt or lose farming.
Percy
1/05/2013 1:57:25 PM

Is there any left?
Bushie Bill
2/05/2013 10:41:12 AM

A rethink, perhaps, ecnerwal. Perhaps it is bad management after all? What other answer is there?
ecnerwal
2/05/2013 8:22:26 PM

Bushie Bill, I have no doubt some grain growers may have made some wrong strategic decisions but that is not always bad management. It is part of risk taking in any business. No business or individual gets it right with every decision. By world standards however, Aussie wheat growers have managed extremely well at producing crops in a harsh climate. Also in an environment of abnormal hostility from overseas competition which involved Govt assistance and market corruption via dumping at prices below cost of production. There is plenty of evidence showing Aussie farmers are world class.
Dave
7/05/2013 7:47:38 PM

Australian farmers are world class, ecnerwal. It's the hopelessly inefficient, over protected, over paid, under worked, subsidised whingeing union labour between the farmers and the consumers that is the problem and only the biggest, brain dead union hack could disagree.

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