Australian government extends review of $3.1 bn GrainCorp-ADM merger

The Australian government today extended the time period for approving the $3.1 billion acquisition of Australian grain handler GrainCorp Ltd by US-based Archer Daniels Midland Co (ADM).

The Australian Foreign Investment Review Board (FIRB) will now give its decision on the deal by 17 December.

''Given the size of this transaction and the complex nature of the issues involved, I have decided to extend the statutory time period. This will allow sufficient time for the new government to carefully consider all the relevant issues and advice from the FIRB before making a decision," Australian Treasurer Joe Hockey, who also oversees FIRB, said in a statement.

Describing GrainCorp as a ''significant Australian company'', Hockey said, ''The government welcomes foreign investment because of the benefits that it provides to the Australian economy.''

Australia's new conservative government, which took office in September, has said that it is open to foreign investment in the country, although its coalition partner, the National Party, has opposed the ADM-GrainCorp merger.

In April, GrainCorp, Australia's largest independent grain handler, finally agreed to be acquired by ADM, after the Illinois-based agriculture giant sweetened its offer to $3.1 billion plus dividend from its earlier $2.9 billion offer. (See: GrainCorp finally submits to ADM's $3.1-bn bid)

Backed by a bumper harvest that gave it a record A$205 million net profit for 2012, GrainCorp had twice rejected ADM's bids saying that the offers undervalued the company.

ADM, which had built up its stake in GrainCorp to 19.8 per cent, has been pursuing the Sydney-based company since October 2012, as part of its plan to expand outside the US.

Buying GrainCorp would be ADM's biggest deal after it acquired WR Grace & Co's cocoa business in 1996 for $470 million.

Founded in 1916, Graincorp, originally called Government Grain Elevator and part of the New South Wales government's department of agriculture, was formed to transport grain from the grain-producing regions of New South through railways.

GrainCorp, which has grown through strategic acquisitions after being privatised in 1992, has over 280 country elevators, grain storage capacity of up to 20 million tonnes spread across more than 2,700km from Queensland to Victoria, and seven bulk grain export elevators, serviced by 20 contracted trains with the capability of hauling up to 4 million tonnes of grain annually.

It handles as much as 60 per cent of Eastern Australia's wheat, barley, canola, chickpea and sorghum crops.

GrainCorp Marketing buys and sells more than 4.5 million tonnes of wheat, barley, sorghum and canola per year, while GrainCorp Malt is one of the world's largest commercial malt producers, producing over 1 million tonnes of specialty malts annually for the world's leading brewers and distillers.

Founded in 1902 by George Archer and John Daniels, ADM is one of the world's largest agricultural processors with more than 270 processing plants, 420 crop procurement facilities and a large crop transportation network.

It main competitors are Cargill, Bunge and Louis Dreyfus.

With annual sales of $90.6 billion and market capitalisation of $24.2 billion, ADM is 10 times the size of GrainCorp by value.

The agriculture sector has recently seen two large acquisitions. Commodities giant Glencore International struck a $6.2-billion cash deal to acquire Canada's largest grain handling company Viterra Inc, and Japan's Marubeni agreed to buy US grain merchant Gavilon, for $3.6 billion.