Archer Daniels Midland, the US-based agricultural commodities merchant, has sold its 19.9 per cent stake in Australian counterpart GrainCorp, abandoning a company it once sought to own in full.
ADM initially sold the stake for A$387m (US$288m) to underwriters UBS, which later sold the shares on to several institutional investors and pension funds.
ADM once viewed GrainCorp as a prize as it sought to diversify its supply map and get closer to growing food markets in Asia. In 2012, ADM divulged a stake and launched an unsolicited takeover attempt for GrainCorp, which was founded a century ago as a government agency. However, the deal was blocked by Canberra.
The announcement comes as the US handles mammoth crops of corn, soyabeans and wheat, giving traders with extensive US silos and shipping networks — such as ADM — an edge in international grain markets.
Australia, one of the world’s largest wheat exporters, is also on the cusp of a record crop. This will boost volumes for GrainCorp, the largest exporter of bulk grains from the east side of the country.
In 2013, the Australian government said ADM’s proposed A$3.4bn takeover of GrainCorp was not in the national interest and rejected the sale. The proposed deal was opposed by the National party, a junior coalition partner in the government.
ADM’s 19.9 per cent stake remained, and in 2014 Juan Luciano, chief executive, indicated he might increase it.
When Malcolm Turnbull ousted Tony Abbott as Australian prime minister in September 2015, some analysts speculated the government could change its mind and allow an ADM takeover. But this was quashed when the National party’s influence within the coalition government increased following a general election in July, which cut the government's majority to a single seat in the House of Representatives.
In the intervening period, foreign ownership of agricultural land and assets has become an even more sensitive issue in Australia, which is experiencing a surge in Chinese investment. ADM’s sale of its stake follows an earlier attempt in July, which was aborted when banks did not offer a high enough price.
Under Mr Luciano, ADM has been buying and selling assets to improve returns.
“As part of our ongoing portfolio management, we carefully considered our equity investment position in GrainCorp and determined that we could better meet our long-term returns objectives by reallocating that capital,” he said.
ADM will sell its stake at A$8.53 per share. After already owning 5 per cent of the company, it acquired a 10 per cent stake at A$11.75 per share in October 2012, then another 5 per cent at A$12.20 in December 2012.
In 2013, ADM wrote down US$155m related to its GrainCorp investment, according to a securities filing.
Nick Markiewicz, analyst at Morgan Stanley, wrote in a report on Thursday that grain traders had suggested Australia could enjoy record harvests and upgraded GrainCorp’s earnings-per-share forecast for 2017 by 46 per cent to 71 cents.
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