Archer Daniels Midland Company (ADM - Analyst Report) recently announced that it had received the nod from South Korea’s The Korea Fair Trade Commission for the proposed acquisition of Australia’s leading agribusiness company, GrainCorp Limited. With this, the company now has clearance from seven 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 regulatory agencies in the U.S., Australia, South Africa, Canada, Japan and South Korea, along with the European Commission. Moreover, the company is in negotiation with the government agencies of China and some other regulators in Australia 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 to 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.
In a separate announcement, Archer Daniels declared a cash dividend of 19 cents per share to be paid on Sep 12, 2013 to shareholders of record on Aug 22, 2013. The new payout marks the company’s 327th successive quarterly dividend. Moreover, Archer Daniels boasts an 81-year record of regular dividend payment.
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 (Hold). The company’s major competitors include Cargill Inc., Bunge Ltd. (BG - Snapshot Report), Tyson Foods Inc. (TSN - Analyst Report) and Ingredion Inc. (INGR - Snapshot Report).