World Grain -- December 2013 - 12

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ADM's GrainCorp acquisition rejected; CEO resigns
CANBERRA, AUSTRALIA - Australian Federal Treasurer Joe Hockey announced on Nov. 28 that he is prohibiting Archer Daniels Midland
Co.'s (ADM) acquisition of GrainCorp Limited, and days later GrainCorp Chief Executive Officer Alison Watkins announced she was resigning her post. Hockey said he rejected the acquisition because it was
contrary to the national interest.
ADM and GrainCorp had agreed to a deal that included ADM paying A$12.20 a share for GrainCorp with a A$1.00 per share dividend
out of current and retained earnings before the deal close. Within
a few days of the rejection, GrainCorp's share price had dropped
more than 25%. On Dec. 2, shares were trading at $8.34, down from
A$11.33 per share prior to Hockey's announcement.
The announcements came shortly after ADM said it would sweeten
its deal for the company, committing to invest hundreds of millions
of dollars in Australian infrastructure with a specific emphasis on rail
projects along with guaranteed grain infrastructure access and price
caps on grain handling charges at silos and ports. The commitments
would have gone into effect upon the closing of the acquisition.
In reaction to Hockey's announcement, GrainCorp's Chairman Don
Taylor said it was extremely disappointing that the transaction would
not be proceeding as planned. He said the decision will have enduring
implications felt by the company's shareholders and the entire industry.
"Australian agriculture has been prevented from realizing the potential benefits from the significant capital ADM would have invested
in the long-term future of the industry," Taylor said. "The board remains confident in GrainCorp's ability to continue to implement our
long term strategy, underpinned by our program of strategic growth
initiatives and strong market fundamentals." But the company will
be implementing that strategy with a new leader. Watkins advised the
board on Dec. 2 of her intention to resign as CEO to take a position
as group managing director of Coca-Cola Amatil Limited.
"I had planned to leave the company at the time control passed over
to ADM. Given last week's unexpected developments, I feel it is in the

best interests of GrainCorp, our people and customers that I move on now and allow the board
to find new leadership to take the business forward into its new phase. An external and internal
search for a replacement has commenced. Taylor
will assume a temporary role as executive chairman immediately and will be acting CEO from
mid-January 2014, filling these roles until the appointment of a new CEO.
Watkins
In explaining his rejection Hockey noted the
fundamental and historic importance of Australia's grain industry.
"The Australian grains industry is an important export industry that
has been transitioning through a significant deregulation process
since the abolition of the wheat exports single desk in 2008. Since
then, deregulation has brought benefits through a significant expansion in the number of bulk wheat exporters, an expansion in our overseas customer base and the construction of new infrastructure.
Owning over 280 up country storage sites and seven of the 10
grain port terminals in New South Wales, Queensland and Victoria,
GrainCorp continues to account for a significant share of eastern
Australian storage, distribution and marketing of grains. Approximately 85% of eastern Australia's bulk grain exports are handled
through GrainCorp's ports network.
Hockey noted that ADM has shown a commitment to be involved
in Australia's market for the long term. He remarked that in rejecting
the full acquisition he could have capped ADM's ownership stake at
its current level. "In fact, to encourage ADM to demonstrate its commitment to the Australian grains industry through its continued investment in GrainCorp, I am inclined, based on current circumstances,
to approve any proposals from ADM to increase its shareholding in
GrainCorp up to an interest of 24.9 percent. This would also provide a
platform for ADM to build stakeholder support for potentially greater
participation in the Australian industry as it develops."

Weather woes hurt GrainCorp's 2013 results
SYDNEY, AUSTRALIA - GrainCorp reported on Nov. 14 statutory net profit after tax of A$141 million for 2013, down from the
A$205 million reported in 2012. The company reported strong
grain volumes with above average grain exports and carry-in of
4.3 million tonnes.

The eastern Australian crop was approximately 17% smaller
than the previous year. While grain volumes were still strong,
the smaller crop translated into lower receivals of 10.4 million tonnes (FY12: 12.2 million tonnes); lower grain exports
of 8.3 million tonnes (FY12: 10.6 million tonnes); and a 17%
reduction in grain throughput to 23.8 million tonnes (FY12:
28.5 million tonnes).
The company said the Storage & Logistics result was historically strong, but it was lower than last year, reflecting
a 28% decrease in residual grain in the network at the start
of the year than when compared with 12 months prior and
12

a return to a more "normal" crop size.
"Our joint venture, Allied Mills, continues to grow its
business, completing its new Tennyson mill expansion in
Queensland as foreshadowed and improving earnings from its
specialty bakery products range," said GrainCorp Chief Executive Officer and Managing Director Alison Watkins. (For
more information on the Allied Mills' new Tennyson mill, see
the January 2014 issue of World Grain).
She said the current 2013-14 winter harvest was well under way, although conditions had been challenging for many
growers. "Drought conditions in Queensland and Northern
NSW have negatively impacted yields in those regions, while
recent frosts have affected many areas further south," Watkins
said. "Crops further south still look larger than average, and
we are hopeful of favorable weather conditions as headers are
in the paddocks over the next few weeks."
December 2013 / World Grain / www.World-Grain.com

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World Grain -- December 2013

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