Deal will 'enhance' chain

01 May, 2013 04:00 AM
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Alison Watkins and Don Taylor.
Alison Watkins and Don Taylor.

FARMERS probably won't see any real change in GrainCorp's activities before next harvest despite it now being in the throes of a $3 billion-plus takeover by US farm commodity giant Archer Daniels Midland (ADM).

Even after the deal is bedded down, GrainCorp expects its grain supply chain services will only be enhanced by the impending takeover, according to chairman Don Taylor.

On Thursday Australia's biggest agribusiness is set to officially accept ADM's third attempt since last October to acquire the business.

ADM teams were this week visiting GrainCorp's storage, export and processing sites across Australia and overseas as part of an intense week of due diligence examinations prior to offering to pay $12.20 a share, plus a dividend of $1/share for the former farmer-owned storage, handling marketing and processing business.

Sites ranging from the Queensland ports of Mackay, Gladstone and Fisherman Islands and Port Kembla in NSW, to silos at Moree, Parkes and Forbes (NSW) and oilseed and malt facilities at Numurkah and Geelong (Vic) and Pinkenba (Qld) have been under scrutiny.

If the due diligence findings are acceptable, GrainCorp directors have given their persistent US suitor (and now biggest shareholder) the green light to make an off-market offer to acquire all the business' outstanding 80.2 per cent shares.

GrainCorp directors will recommend the ADM plan to shareholders late this week, initiating what could be a six month (or longer) merger process, depending on regulatory approval processes in Australia and overseas.

However, the deal is open-ended and allows GrainCorp to talk to other parties if a better alternative offer lands on the table in the next few months.

Given the time frames involved, managing director Alison Watkins said it was "fairly likely" the existing management team would guide the company through the end of year winter crop harvest period.

"They have made clear they like and respect our business and recognise our need to continue managing in the interests of all shareholders," she said.

Based on the big financial commitment ADM had made to securing GrainCorp's operations, she anticipated a business as usual approach to the takeover.

In the meantime the company's focus would be continue to be on lifting the turnaround speeds for grain deliveries to its receival sites, improving rail loading efficiency in the bush and offering competitive prices.

Last year's $17 million investment in 24 new high-speed mobile grain stackers for country silos and new smart phone market information app technology was typical of the programs to support growers that would continue rolling out this year.

Announcing ADM's acquisition plan last Friday Mr Taylor described it as a great day for his shareholders whose interests had been a prime focus of discussions with the US company.

At the same time however, he said ADM "really liked the GrainCorp network" and the way the Australian business operated.

ADM was likely to want to build on GrainCorp's competitive service philosophy towards growers and enhance its commitment to domestic and export customers.

While he knew farmers would have different reactions to the prospect of dealing with the US giant, Mr Taylor said growers' ultimate concern was getting a strong, reliable service at competitive prices.

The $3b acquisition reflected a vote of confidence in Australian farmers and was likely to be accompanied by a serious commitment from ADM to keep its new business partners happy.

Although talks had so far been preliminary and not based on how the Australian business would run, he said ADM's global network was a neat fit with GrainCorp, with little overlap in their trading activities, which would enhance the local company's chances to provide better informed market options to graingrower suppliers.

GrainCorp's grain storage, handling and logistics network, based on seven ports and more than 270 grain receival sites in Queensland, NSW, Victoria and South Australia, recently expanded to include oilseed processing and handling facilities in New Zealand and Asia.

It also runs grain marketing operations in Australia and Europe, owns the world's fourth biggest barley malting operation, with 18 plants in North America, Europe and Australia, and has a 60pc stake in Australia's biggest flour business, Allied Mills.

After rebuffing the multinational's two previous offers, Mr Taylor said his board believed the latest ADM attempt recognised the strategic value of GrainCorp's unique assets.

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READER COMMENTS

Rusty
1/05/2013 10:25:58 AM

"The $3b acquisition reflected a vote of confidence in Australian farmers and was likely to be accompanied by a serious commitment from ADM to keep its new business partners happy". My father says this is the same patronising language used by American interests in the 1940's as they ripped Australian wheat farmers apart.
Will
1/05/2013 1:19:21 PM

No, not this year but for the 2014/ 15 harvest, the Aussie wheat grower and the (remaining) graincorp staff will but in for a rude shock... A "enhanced supply chain" is not what springs to mind here.
Louie
1/05/2013 5:46:44 PM

A serious question: why does the Chinese Ministry of Commerce have to give approval to the deal?
ecnerwal
1/05/2013 8:29:25 PM

Will and Rusty, I note that 76% of people surveyed agree with you that wheat farmers here are about to get shafted even further. What a disgrace. Within a very short time grower numbers will decline dramatically. And Australia will be the worse for it. When is the Government and Industry leadership going to wake up?
jed
1/05/2013 9:48:38 PM

Never beleived anything any Graincorp Director has told me in the past and it is no differnet with Don Taylor. They have to by law do whats best by the Shareholder not the ones that use their supply chain. We are where we are now because to many people put to much trust in the likes of Greentree and Hards previous Chairman who have done extremly well with their GNC shares they aquired during their rain in office. Just remember the disaster those from AWB sold shareholders when they convinced gulabull voters to sell off AWB. Bugger all and foreign ownership!!
PT
2/05/2013 7:42:51 AM

How about GGL directors?They sold our share holding at a discount to the trade without giving growers a change to buy any.
Jock Munro
2/05/2013 8:47:55 AM

The USA now controls the marketing,handling and storage of the Eastern Australian wheat crop.
ecnerwal
2/05/2013 11:11:46 AM

Yes Jock. Sad but true. This is what you get when the myopic experts at dismantling sound structures get their way by highlighting the monor shortcomings in the structure. They are expert at destroying but care nothing for replacing what they have destroyed with something better.
ecnerwal
2/05/2013 11:51:05 AM

Good question Louie, WHAT DOES THE CHINESE MINISTRY OF COMMERCE NEED TO GIVE APPROVAL FOR? So far no answers?
notajock
3/05/2013 2:26:17 AM

ecnerwal, time to do a bit of learning, reading, google.....
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It is a start but any "car" with two wheels and no roof should likewise be banned from public roads.
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Watch the space after the levies report.
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Well the farmers and country people think labour are a bad party. however Labour have always