ACCC to decide on ADM

27 Jun, 2013 02:00 AM
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ACCC deputy chairman Michael Schaper.
ACCC deputy chairman Michael Schaper.

THE Australian Competition and Consumer Commission (ACCC) has pegged today as the day it will release its final decision on Archer Daniels Midland Company's (ADM) proposal to take over GrainCorp.

At a Grain Industry Association of WA (GIWA) and Agribusiness Association of Australia (AAA)-hosted breakfast in Perth last week ACCC deputy chairman Michael Schaper told a group of WA growers, agribusiness and food company representatives, the ACCC's focus was on the impact the potential merger would have on competition and markets in Australia.

It was a rare insight into the ACCC's role in the Australian grains industry, where Dr Schaper covered off on a number of major developments in key areas of direct relevance to WA agriculture including reforms to the wheat export regime, port access and CBH's Grain Express.

He said the merger review of ADM's proposed takeover of GrainCorp looked at whether the potential deal would substantially lessen competition in the market and whether or not a number of other issues might arise if the merger didn't go through.

"In terms of company mergers Australia has a somewhat unusual regime in the form of informal reviews," Dr Schaper said.

"Sometimes they'll be prompted by the ACCC and other times by the companies or firms involved.

"Those companies have the opportunity to come to the ACCC on their own accord and make it known they're proposing a merger.

"The ACCC also frequently carries out public consultation in regards to major merger matters.

"Incidentally, it's not responsible for whether those final decisions impinge on the level of foreign investment in the country - that's a whole different issue."

During his address Dr Schaper also touched briefly on a number of Australian wheat industry issues including the Grain Express ruling and market access agreements.

"The Australian wheat industry generally had already been and still remains on the cusp of a number of profound changes," he said.

"This is a very different industry to what it was only a couple of decades ago."

His address was timely in light of the potential ADM and GrainCorp merger.

On Monday GrainCorp released its Target's Statement in which the GrainCorp directors unanimously recommend that shareholders accept the offer from ADM Australia Holdings II Pty Limited (ADM Australia), a wholly owned subsidiary of ADM, to acquire all of the GrainCorp shares not already held by it in the absence of a superior proposal.

The Target's Statement contained GrainCorp's formal response to the offer, including detailed reasons for the GrainCorp directors' recommendation, as well as other relevant information for shareholders to consider in deciding whether or not to accept the offer.

GrainCorp said should the offer become unconditional, GrainCorp shareholders who accept the offer and hold shares at the relevant times would receive cash payments of $13.20 a share, made up of:

p a payment from ADM Australia of $12.20 a share and

p permitted dividends totalling $1 a share.

The dividends were expected to be fully franked to provide additional value of up to $0.43 a share for those shareholders who could capture the full benefit from franking credits.

GrainCorp also said its shareholders might also be entitled to receive an earnings dividend - a dividend equal to 3.5 cents a share for each full month between September 30, 2013 and the earnings dividend end date (expected to be the date the regulatory conditions of the offer have been satisfied or waived).

In making their recommendation for shareholders to accept the offer, GrainCorp's directors considered the cash payments of $13.20 a share represented a significant premium to GrainCorp's trading prices before the announcement of ADM's initial takeover proposal.

On Monday a copy of the Target's Statement was lodged with the Australian Securities & Investments Commission and given to ASX Limited and ADM Australia.

Just last week Fairfax journalist Andrew Marshall reported that Australian growers shouldn't underestimate why Illinois-based multinational ADM wanted GrainCorp.

In recent years GrainCorp shareholders had become growingly frustrated by the company's east coast grain accumulation and port network which was built specifically for growers and paid for by grower levies.

p GrainCorp's Target's Statement will soon be made available to shareholders and will be available for review and downloading at graincorp.com.au

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