ADM is a grain company. It takes corn, soybeans, and wheat and turns them into food ingredients, animal feed, chemicals, and fuel. It had pushed hard for the GrainCorp deal. Earlier this week, it offered up an additional $200 million to build agriculture infrastructure in Australia, to sweeten the pot a little. No such luck.
The company was counting on GrainCorp to expand its global reach, something it’s been promising investors. “Our strategy is to do some investment for growth outside the U.S.,” said ADM CEO Patricia Woertz at a Morgan Stanley conference earlier this month.
The failure of the deal surprised Kevin Kerr, a market strategist at Kingsview and editor of CommodityConfidential.com. “It’s going to limit their ability to access Asia, which is what they were really going after. And, this would have been a really good conduit for that.” Asia is the market you dream about these days if you are a grain company. “China has a lot of mouths to feed, and agriculture is growing and growing,” he says.
ADM already owns about 20 percent of the GrainCorp and says it’ll look for other places to invest.
Kerr expects we’ll see more of this sort of deal-busting. As governments of resource rich countries -- try to protect what they have.