WHILE Nationals leader and deputy Prime Minister Warren Truss said it was “highly unlikely” the Treasurer’s decision to reject Archer Daniels Midland's (ADM) takeover bid for GrainCorp would deter future foreign direct investment (FDI) in Australian agribusiness, one lobby group warned “investors are now certain to avoid putting their capital at risk”.
Pastoralists and Graziers Association Western Grain Growers chairman John Snooke said the Australian grains industry was “once again being sacrificed for political gain” so that the Liberal Party could appease “their protectionist partners”, the Nationals.
“This decision is saying to the rest of the world that Australia is no longer open for business as any foreign investment in our grains industry will be actively discriminated against,” Mr Snooke said.
The shock rejection of US giant ADM’s $3.4 billion bid for Australia’s largest listed agribusiness by Federal Treasurer Joe Hockey caught many off guard.
Following the announcement, GrainCorp shares plummeted on Friday by more than 22 per cent, finishing the trading day at 8.72 after starting at 11.20.
The announcement surprised stakeholders, disappointed corporate interests and delighted farmers. A decision on the bid was expected closer to the December 17 deadline, with many expecting the Treasurer to rule in ADM’s favour.
NSW grain grower Ben Kelly said the decision was "terrific news", noting the delineation between FDI and an outright takeover.
"The key issue is that there's a big difference between foreign investment and foreign ownership," he said.
Mr Kelly, who farms "Goran Lake" near Spring Ridge in NSW with his wife Trish, said while the government has indicated foreign investment in agriculture is welcome, the ADM bid was essentially about ownership rather than partnership.
"If they were investing in agriculture they (the foreign investors) would be building things such as railways or ports," he said.
Mr Truss called the news a win not for the National Party, but for the nation, noting the importance of retaining a major Australian player on the global agribusiness stage.
“Countries around the world frequently reject foreign investment applications, but that doesn’t mean that others don’t come along in future,” he said in Townsville on Friday.
“As Joe Hockey said... he’s approved over 130 applications, this is the first one he’s rejected.
“Australia will welcome foreign investment, but (this decision) also provides a salutary message that we will want to test each of these… applications to make sure it is in our national interest.”
Infrastructure a priority
Mr Truss said GrainCorp would now need to focus on improving infrastructure and developing their international markets to ensure it achieved its potential of being a major global agribusiness.
“There are farmers in Australia who’ve been critical of GrainCorp and their winding back of services,” he said.
“GrainCorp needs to recognise it has an obligation to its suppliers to provide quality services and to invest wisely to get a better return for the Australian industry.”
Federal Agriculture Minister Barnaby Joyce said growers across the east coast were thrilled with the Treasurer’s call.
"I've been receiving message after message from grain growers who are ecstatic with the decision, not only for their futures but for the future of Australia," he said.
Mr Joyce said the government would continue to fund investment in GrainCorp and other projects to benefit future agricultural growth, pointing to the government's $300 million plan for inland rail.
"That project is real investment into the future of our nation which will assist the movement of grain and of other products, and this shows that our nation will invest in infrastructure regardless of whether ADM makes an offer or not."
'The right decision'
GrainCorp's largest individual shareholder, Don Seaton, described the Treasurer's call as "economically sophisticated".
"The decision recognises that while FDI is immensely beneficial to Australia, this country needs a sound national strategy to govern foreign sourced investment in its agriculture sector," said Mr Seaton, who stood to make approximately $30 million if the offer had gone ahead.
"The next step is to put in place industry-wide structural safeguards to ensure that future approaches by foreign agribusiness may be welcomed without the threat of damage to competition in our local industries."
NSW Nationals Senator Fiona Nash said Mr Hockey had “absolutely made the right decision” in blocking the bid. The Nationals have consistently opposed the takeover since the proposal was announced in October 2012.
“We’ve just had the biggest David versus Goliath battle ever, and won,” she said.
Senator Nash said Mr Hockey had to consider a wide range of complicated issues in reaching his final decision, and the outcome reflected the serious concerns of farming constituents.
She also acknowledged NSW Liberal Senator Bill Heffernan, who spearheaded a recent Senate inquiry into the potential sale. That inquiry was due to recommence next week, but has now been cancelled given Mr Hockey’s decision.
“Bill has enormous rural expertise and played a key role in ensuring the Treasurer had all the information that was needed to make the right decision,” she said.
“All of the Nationals from the beginning were against the sale going ahead, but many of our rural Liberal colleagues also held the same view.”
Senator Nash noted GrainCorp had already announced a commitment of $250 million towards improving the company’s logistics system, and she looked forward to seeing how that capital was invested in future.
NSW Farmers Grains chair Daniel Cooper said the complex state of the east coast grain market meant a foreign takeover would have had "distorting impacts" on the industry.
“This (GrainCorp) infrastructure is a monopoly, handling 75 per cent of the grain grown across the east coast,” he said.
Mr Cooper said the inability of grain traders to compete under an ADM regime would have dramatically increased competition concerns for farmers.
Nationals Riverina MP Michael McCormack was relieved the decision would "provide certainty coming in to the end of harvest".
“Our $9 billion a year grain harvest, along with up-country silos and storage sites, rail, ports and other critical infrastructure, remain in Australian hands," he said.
“Our farmers feed the nation and the world, and this decision will give growers the certainty to continue doing what they do best and protect Australia’s food security.”
MP Mark Coulton said grain growers in his NSW electorate of Parkes had opposed the bid.
“The majority of farmers in the electorate held the view that the sale was not in the best interest of Australia,” Mr Coulton said.
“The Treasurer has shown that he has a clear understanding of the issues of storage and port access, which would have been very problematic if the takeover had been allowed.”
However, clearly not all players in the agribusiness drama were pleased with the surprise announcement.
Long-term implications for FDI
To say ADM chairman Patricia Woertz and GrainCorp chairman Don Taylor were disappointed would be an understatement.
“Throughout this process, we worked constructively to create an arrangement that would be in Australia’s best interests and made substantial commitments to address issues that were important to stakeholders,” Ms Woertz said.
She had been confident her company's $13.20 a share offer for full control would have "created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy".
On ADM’s plans for its current investment in GrainCorp, Ms Woertz said, “we will look to work with them to maximise returns on our investment and create value for both companies”.
ADM holds a 19.85pc interest in GrainCorp and under the terms of the Takeover Bid Implementation Deed, must continue to hold this interest until at least December 31, 2013.
Mr Taylor was still confident in GrainCorp’s ability to implement a long-term strategy of strategic growth initiatives underpinned by strong market fundamentals. However, he predicted "enduring implications that will be felt not only by our shareholders but by the entire industry".
Mr Snooke labelled the National Party’s position on the sale “protectionist” and brought up old wounds, citing the single desk debate and Australian Wheat Board scandal.
“These are the same federal Nationals who advocated that removing the single desk was not in the national interest, whilst believing that doing business with a corrupt Middle East regime was; that abolishing Wheat Exports Australia was not in the national interest but re-regulating the wheat industry was; and that any foreign investment is not in the national interest if it involves grain.”
Mr Snooke said since the abolition of the single desk for wheat in 2008 Australian farmers had benefited from an increase of purchasers and demand for their grain, yet "the federal National Party remains committed to reversing the benefits so far achieved".
- with Karen Bailey, Colin Bettles and Holly McAlister