Archer Daniels Midland Company (ADM - Analyst Report) yesterday got the nod from The Japan Fair Trade Commission for its proposed acquisition of Australia’s leading agribusiness company, GrainCorp Limited. With this, the company now has clearance from five government agencies for the acquisition.
After gaining The United States Federal Trade Commission’s approval in Nov 2012, Archer Daniels had sealed the deal in late Apr 2013. Since then, the company has been seeking fair trade clearance from the government agencies of different countries.
At present, Archer Daniels has the acquisition sanction from five countries including the U.S., Australia, South Africa, Canada and Japan. Moreover, the company is in negotiations with the government agencies of China, the European Union (EU) and South Korea for the final clearance.
Archer Daniels has agreed to pay A$12.20 per share for all outstanding shares of GrainCorp which totals approximately A$3.4 billion. The American agribusiness giant already holds 19.8% stake in the Australian agri-products dealer, acquired for an average of A$11.24 per share.
Archer Daniels had made an initial bid of A$11.75 per share in Oct 2012 and later raised it by 3.8% to A$12.20 per share in Dec 2012. At the time of the initial offering in October, Archer Daniels had about 14.9% interest in the Australian farm products dealer.
Archer Daniels’ interest in acquiring GrainCorp is consistent with its ongoing portfolio management initiative. The company’s strategy focuses on expanding its Agricultural Services and Oilseeds businesses across the globe by investing in key supply areas beyond national borders.
Apart from increasing the company’s global footprint, the aforementioned buyout will expectedly help Archer Daniels consolidate its financial position.
Moreover, Archer Daniel’s union with GrainCorp will likely facilitate the former to broaden its scope, by channeling Australia’s farm produce to meet the growing demand for crops and food in the global market, especially in Asia and the Middle East.
Currently, Australia’s agricultural business has ample opportunity for agri-based companies that are seeking to expand. Australia is a major exporter of many commodities, ranging from minerals such as iron ore to agricultural goods like wheat.
Archer Daniels procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and abroad. The company has three major business segments: Oilseeds Processing, Corn Processing, and Agricultural Services.
Archer Daniels currently carries a Zacks Rank #3. The company’s prime competitors include Cargill Inc., Bunge Ltd. (BG - Snapshot Report), Tyson Foods Inc. (TSN - Analyst Report) and Ingredion Inc. (INGR - Snapshot Report).