GrainCorp (GNC) Fell 22% after Australia Rejects Archer Daniels’ (ADM) Takeover Bid

The shares of GrainCorp Ltd (ASX:GNC) suffered a steep decline as investors reacted negatively on the decision of Australia to block the takeover  proposal of Archer Daniels Midland Company (NYSE:ADM). The stock plummeted 22.14% to $8.72% after trading hours on Friday in Sydney. ADM’s stock price also dropped by 2.99% to $40.25 per share in New York.

ADM’s takeover contrary to national interest

Australia rejected the proposal of Archer Daniels Midland Company (NYSE:ADM), the U.S. based agribusiness giant  to acquired GrainCorp Ltd (ASX:GNC), the biggest crop handler in the eastern part of the country for A$2.2 billion.   Federal Treasurer, Joe Hockey emphasized that now was “not the right time” for 100% foreign acquisition of a key business like GrainCorp Ltd (ASX:GNC), and it was contrary to the national interest of the country.

Hockey said, “For me to reject this proposal, I had to determine that the acquisition of GrainCorp by ADM is contrary to the national interest. Based on all the available information, I have now made that decision.”

According to Hockey, he conducted a careful and long evaluation on the takeover proposal of Archer Daniels Midland Company (NYSE:ADM), and described it as “one of the most complex cases” submitted to the Foreign Investment Review Board.

Hockey indicated his intention to approve any proposal from the U.S. based agribusiness giant to increase its stake GrainCorp Ltd (ASX:GNC) to 24.9%. “He’s opening the door for us to move to a higher level and that is something we would consider,” according to Victoria Podesta, spokesperson for Archer Daniels Midland Company (NYSE:ADM).

The company owns 19.5% stake in GrainCorp Ltd (ASX:GNC), and it has no plans to appeal the decision of the Federal Treasurer. Podesta said the company has different options to do with the money allocated for the transaction, but did provide further details about it.

ADM, GrainCorp disappointed by the decision

Archer Daniels Midland Company (NYSE:ADM) expressed disappointment with the decision of Australian Federal Treasurer to block its proposal to acquire GrainCorp Ltd (ASX:GNC). The company’s chairman and CEO Patricial Woertz said, “We are disappointed by this decision. We are confident that our acquisition of GrainCorp would have created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy.”

According to Woertz, the company worked constructively to create an arrangement that would be in the best interest of Australia during the entire prices. She added that Archer Daniels Midland Company (NYSE:ADM) made substantial commitments to resolve all the important issues raised by stakeholders.

On the other hand, GrainCorp’s chairman Don Taylor said the company is “extremely disappointed” that the transaction will not proceed.