Archer Daniels Midland opened a fresh chapter in the consolidation wave in agricultural trading by unveiling plans to buy GrainCorp, the Australian grain handler, on which it spent $280m raising its stake.
Archer Daniels Midland said it had approached the GrainCorp board hoping to negotiate an agreed takeover of the Sydney-based group, in which it had raised its holding from 4.9% to 14.9%.
As part of the Archer Daniels Midland empire, GrainCorp "would be better positioned to connect Australia's farmers with growing global demand for crops and food, particularly in Asia and the Middle East", Patricia Woertz, the ADM chief executive, said.
A deal would also promote a drive by ADM to boost its agricultural services and oilseeds operations by investing in "key supply regions" outside its native US, an expansion campaign which earlier this year took it into the auction for Canadian grain handler Viterra.
While ADM pulled out of the auction for Viterra on valuation grounds, leaving Glencore to win the deal, Ms Woertz said that a GrainCorp acquisition "would meet ADM's key financial hurdles".
GrainCorp said that any proposal from ADM would be reviewed "as well as other options to maximise value for GrainCorp shareholders".
Deal spree
ADM's move revives a merger wave in the sector which has this year seen Marubeni purchase US-based Gavilon for $5.3bn, besides Viterra's $6.1bn acquisition by Glencore.
It also puts ADM on the long list of foreign groups, including US-based Cargill, Japan's Sumitomo Corporation and Viterra itself, to seek investment in Australia, which deregulated grain export sales some four years ago.
GrainCorp itself in 2010 bid for AWB, Australia's former wheat export monopoly, before being trumped by Canada's Agrium.
Agrium sold AWB's trading assets on to Cargill, keeping the retail operations itself.
Expansion drive
However, GrainCorp has succeeded in a series of takeovers in malt, since entering the market with the 2009 takeover of United Malt Holdings.
and, more recently, paid $170m for Integro Foods, the edible fats and oils business of Goodman Fielder, and $300m for peer Gardner Smith to create a substantial oilseeds processing unit.
The drive has been broadly welcomed by investors, helping GrainCorp shares hit a four-year highs in August, before waning expecations for Australia's wheat crop, and with it export volumes, kicked in.
GrainCorp's market value remains above $2bn, and would be $2.8bn at the price of Aus$11.75 a share that ADM paid on Thursday for its extra 10% stake.
Rival suitors?
However, with GrainCorp the last listed target of substantial size for an acquirer - with CBH Group, the Western Australian grain handling giant co-operatively owned � many investors believe that ADM may face competition.
Macquarie analysts earlier this week flagged US-based Bunge and Singapore's Wilmar International as potential suitors, with market speculation on Friday also mentioning Olam International, which is expanding rapidly in grains handling in Russia.
ADM lost out on the Viterra deal after the price spiralled above levels it felt comfortable paying.
"We determined that at the valuation level we anticipated to be competitive, which has been confirmed by the announced deal, the acquisition would not meet our return objectives," Pat Woertz, the ADM chief executive, said in March.
ADM shares stood 1.1% lower at $28.74 in late morning deals in New York.
