How ADM misjudged bid

ADM's refusal to even consider having compromise conditions attached to its controversial $3 billion bid to buy Australia's biggest listed agribusiness, GrainCorp, was just one of many clumsy decisions by the US giant.

After a 14-month struggle to win support from rural Australia and the foreign investment umpire, Treasurer Joe Hockey finally blocked the deal last November, openly defying the wrath of local and overseas corporate forces and ADM's powerful US government connections.

It was only the third time a foreign takeover of an Australian business had been halted by a federal Treasurer's call.

Just a month earlier Mr Hockey is understood to have come under intense pressure while visiting the US to give ADM the green light to buy the eastern Australian grain trading, processing and logistics company for a premium share price of $13.20/share.

According to foreign takeover specialist and Canberra lawyer, Malcolm Brennan, ADM completely misjudged and misplayed the GrainCorp deal and the consequences of rising public anxiety about overseas investment in Australian agriculture.

The big Illinois-based grain trading and processing multi-national started off badly by under-estimating the danger of making its takeover play in the lead up to last year's federal election.

"To put it simply there are no votes to be lost for politicians kicking foreign investors," said Mr Brennan, a special counsel with global legal firm King and Wood Mallesons.

He said the incumbent Labor government went cold when it came to making a speedy decision and flick-passed a final verdict to the incoming Mr Hockey and his Coalition government.

"This sort of thing doesn't just happen in Australia - look at the decision in Canada by the Saskatchewan government blocking BHP's attempt to buy Potash Corporation prior to a provincial election."

ADM had also misjudged a tide of concern surrounding foreign farmland acquisitions which had grown rapidly in the past decade partly fuelled by the Foreign Investment Review Board's perceived inaction on a rush of farmland acquisitions by overseas investors and governments, including mining and gas extraction interests.

Among ADM's other mistakes were its "fly-in, fly-out" attitude to engaging with the takeover issue and debate about its acquisition of a key player in the Australian agricultural marketplace.

While the company's grains president Ian Pinner made irregular dashes to Australia, including whistle-stop tours around graingrowing areas where he attempted to spruik the takeover idea, Mr Brennan said ADM wrongly assumed that buying a listed company like GrainCorp would not be much different to finalising a takeover deal in the US.

It expected the stock market acquisition to fall into place on its terms.

At the last minute, president and chief executive officer, Patricia Woertz flew to Australia, too, but rather than spend a week in Canberra talking with the Treasurer, MPs on all sides of parliament, departmental bureaucrats and industry representatives, she was in Melbourne for just 24 hours meeting with a selection of key industry players.

She belatedly set up an offer of an extra $250 million for GrainCorp to spend on grain handling infrastructure upgrades, but it was too late.

Mr Brennan told the NSW Farm Writers Association that ADM's "chequered past", which included price fixing scams and more recent admissions of bribery, had combined with claims that GrainCorp had near-monopoly grips on the Australian grain port and storage market.

The issue became a potent "recipe for national interest concern".

ARCHER Daniels Midland's (ADM) aspirations and activities featured in 321 national newspaper stories in Australia last year, plus 92 radio and television reports and 24 press releases.

Most media coverage tended to paint the company in a negative light according to Malcolm Brennan, special counsel with King and Wood Mallesons, the biggest international law firm outside the US and Britain.

At the same time lobbyists representing pro- and anti-ADM networks swamped Canberra, but surprisingly for the big US corporate, its well-oiled lobbying strategies were unable to gain enough traction in Australia.

Mr Brennan said ADM's big guns, former Labor and Liberal ministers John Dawkins and Helen Coonan from Government Relations Australia (GRA), were widely perceived as "not having sufficient agricultural weight to sell the US giant's story credibly".

Meanwhile, in New York "something quite serious happened" which saw Mr Hockey "harassed and harangued by US lobbying efforts that resounded negatively for ADM and did not do it any favours".

Mr Brennan said a key deciding factor in Treasurer Joe Hockey's decision came down to the fact that the Foreign Investment Review Board (FIRB) was split on whether the GrainCorp sale should go ahead.

"It makes it hard for the Treasurer to make a decision if there is no clear direction from his advisors, including what sort of conditions should be imposed."

ADM had not made the FIRB's task any easier by making it known it did not want special regulatory conditions attached to the sale.

Taking a tough stand on the American bid also served to show other foreign investors, particularly the Chinese, that Canberra was not giving favourable treatment to any applicants.

Mr Brennan said despite the uproar in business circles criticising the decision and its potential impact on Australia's business reputation, it had not damaged the government's "open for business" mantra.

Between the September federal election and the GrainCorp decision on November 28, 130 foreign investment applications to buy land or businesses in Australia had been approved by Canberra "and a lot more had followed since".