Will New Australian Government Encourage Another Graincorp Takeover Bid from ADM?
After Australia’s Abbott government blocked a takeover of Graincorp by Archer Daniels Midland (ADM) in 2013, new speculation of a fresh takeover is arising, as the election of new Prime Minister, Malcolm Turnbull indicates that a revisiting of a $3 billion acquisition of Graincorp may now be approved.
Since Mr. Turnbull won the Liberal leadership and position of Prime Minster on September 14, Graincorp’s shares have climbed almost 9%. "You don't have to be a rocket scientist to figure it out," said one analyst about Graincorp's share price surge, reports the Sydney Morning Herald.
In 2013, Treasurer Joe Hockey, blocked ADM’s takeover of Graincorp stating it was ‘contrary to the national interest’, but even though Mr. Hockey still retains his cabinet seat, this sentiment could quickly change with the new government.
"Yesterday's and today's share price action does correlate with the change in government and with the view that under Malcolm Turnbull's prime ministership Australia will be more open for business and more open particularly for FIRB [Foreign Investment Review Board] approvals," Morgans analyst Belinda Moore said.
After its failed attempt at Graincorp, ADM has been maneuvering to gain presence in the Asia-Pacific region. In 2014, the company bought the 20% share it did not already control in EU-based grain business Alfred C. Toepfer for US$130.7 million – a move that will give the two companies a combined control of US$14 billion worth of commodities business per year in the region.
If ADM does make another offer for Graincorp under the new adminstration, it could likely benefit from the weakening Australian dollar, which has fallen from US92 cents to US71 cents since the company’s 2013 bid was blocked.