ADM sells stake in top Australian grain handler, as big harvest looms

05.12.2016

The agribusiness giant Archer Daniels Midland found a buyer for its stake in Australian grain handler GrainCorp, after being rebuffed from purchasing the whole business three years ago.

UBS will take on ADM's 19.9% stake in GrainCorp, for A$387m, or A$8.53 a share, ADM said.

ADM's made a bid for the whole of GrainCorp back in 2013, but was blocked by regulators over fears about foreign ownership.

The deal comes as grain handlers gear up for a big wheat harvest, particularly in the east of the country.

GrainCorp shares in Australia rose 1.8%, to $8.87. ADM shares in New York were down 0.1% in midday deals, at $44.25.

Series of disappointments

ADM shopped its stake in GrainCorp stake this year, but cancelled the sail process after the holding attracked little interest, with buyers reportedly unwilling to pay more than A$8 a share.

GrainCorp has suffered its own setbacks, after leading a failed bid to take-over control of rival grain handler CBH.

Australian Grains Champion - the GrainCorp-backed consortium, ditched its attempt to take over CBH, "in the light of CBH's ongoing complex and long-winded structure and governance review", in response to its initial approach.

And back in 2010, GrainCorp's attempt to ake over AWB, was gazumped by Canada's Agrium.

Big grain harvest

ADM may have soured on GrainCorp, as global wheat prices come under pressure, but grainhandlers will benefit from the big harvest that is expected this season.

On Friday NAB increased its forecast for Australian wheat production to 29.4m tonnes, just shy of the 2011-12 record and 21.7% higher than last season.

Some recent analyst estimates have been for a crop as high as 33m tonnes.

"Much of the increase will come from New South Wales, South Australia and Victoria, with the Western Australian harvest likely to be flat," NAB said.

But the bank downplayed potential returns.

"While the headline figure will be large, prices remain at 10 year lows on global markets," NAB said.

"This has been further compounded by quality downgrades due to the wetter than average spring."


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