SYDNEY, Nov 27 (Reuters) – Archer Daniels Midland Co will invest A$200 million in agricultural infrastructure should it win approval for its A$2.8 billion ($2.56 billion) takeover of Australia’s GrainCorp, the U.S. agribusiness said, in a move seen as a sweetener for farmers ahead of a regulatory deadline.
Some farm groups and politicians from within Australia’s ruling Liberal-National coalition have opposed the takeover, arguing that Australian assets should not be sold to foreign firms and that a sale could risk the country’s food security.
ADM on Wednesday said it would invest A$200 million in grain handling and infrastructure, and also committed to joining an “industry-agreed” protocol for reporting wheat stocks across its bulk grain storage sites, two central policy goals of Australian farmers’ groups.
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“We have had substantive discussions with growers, policymakers and other stakeholders, and we’ve been committed to finding common ground and developing solutions that address issues and opportunities that have been raised,” Ian Pinner, president of ADM unit ADM Grain, said in an announcement to the Australian Securities Exchange.
Analysts said the move was an attempt to win support from local farmers, although they were unsure whether $200 million would be enough.
ADM may need to agree to divest from some GrainCorp grain terminals to convince Australian regulators to support the takeover, said Tom Graves, equity analyst for S&P Capital IQ in New York.
“There’s enough negative noise coming out of Australia that I think it incentivized ADM to try to make the deal more attractive,” Graves said. “My sense is there is certainly some skepticism about whether the deal is going to go through.”
The GrainCorp acquisition is part of ADM’s strategy to expand globally and would increase opportunities for exports to Asia and the Middle East. It is the latest move in the rapid consolidation of the global grains sector amid intense competition to feed fast-developing countries like China.
ADM last month said it no longer expected the deal to close this year, as was previously planned.
Australian farmers welcomed the latest commitments from ADM, but said they would need more details before deciding whether to support its bid for GrainCorp, the largest handler of grains on Australia’s East Coast.
“It shows that they want to put money on the table, but we need to work out where they intend to spend that money and how they intend to run the business,” said Dan Cooper, a farmer in New South Wales and a committee member of the New South Wales Farmers Federation.
Shares in GrainCorp rose more than 4 percent following the ADM pledge, buoying optimism the takeover would get the green light. ADM shares on Wednesday dipped 0.24 percent to close at $41.50.
The commitments come ahead of a Dec. 17 deadline by which Australian Treasurer Joe Hockey said he would make a final decision on whether to approve or reject the GrainCorp takeover.
Amid farmer opposition to the ADM deal, a political divide has emerged between the ruling Liberal Party, which is seen as pro-investment, and its junior partner, the rural-based National Party, who oppose the deal.
ADM also needs approval for the acquisition from regulators in China, where GrainCorp has an edible oils facility.
