Agribusiness & Food, Logistics, Ports & Terminals

ADM ponders GrainCorp stake

GrainCorp shed at the Port of Portland. Photo: David Sexton

US agribusiness Archer Daniels Midland (ADM) could be looking to sell its 19.9% stake in GrainCorp, two years after its takeover of the Australian grain conglomerate was thwarted by then-treasurer Joe Hockey.

GrainCorp this week announced it expects an underlying net profit after tax of $45m in 2014/15, down from as much as $60m by previous estimates.

Archer Daniels Midland, an Illinois-based agribusiness giant, also announced a profit slide this week, saying it was struggling with weak commodity prices, and market slowdowns: its stock dropped nearly 7% on Tuesday as a result.

With times looking tough for both businesses, market speculation has the US firm looking to end its investment in the Australian grain business.

AFR’s StreetTalk column reported on Monday the US firm was understood to have “sounded out” a pair some major Asian funds managers over the potential sale of its GrainCorp stake.

That’s despite the firm’s assertion that it was still interested in buying GrainCorp, after Joe Hockey famously blocked its $3bn takeover attempt in 2013 on foreign ownership concerns.

The recent replacement of Hockey with new treasurer Scott Morrison was regarded by many as good for the prospect of another potential takeover offer from ADM to GrainCorp.

At the time, Hockey – rejecting his first foreign takeover bid after approving all those prior – said he was responding to “a high level of concern from stakeholders and the broader community,” adding, “Now is not the right time for a 100% foreign acquisition of this key Australian business.”

Six days after he wrestled prime ministership off Tony Abbott, new PM Malcolm Turnbull announced Hockey would step down, to be replaced by Morrison, the former social services minister.

Several media sources were tipping ADM to make a new bid for the Australian grains business by the end of the year. Graincorp shares rose over that from roughly $8.10 to more than $8.70.

Following this week’s profit forecast announcement, however, GrainCorp shares have spent the week in the region of $8.45.

GrainCorp boss Mark Palmquist said it was the company’s key business – grain – that was hurting its bottom line.

“Whilst it’s pleasing our processing businesses have contributed a significant portion of this year’s earnings, FY15 has largely been influenced by factors in our grains business,” he said on November 3.

“Continued challenging conditions in global grain markets have affected the result of GrainCorp Marketing. This has only been partially offset by a good performance from Storage & Logistics with upcountry receivals of 7.4mt and grain exports of 3.5mt in the face of a smaller eastern Australian crop.”

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