After long and careful deliberations, I have today made an order under the Foreign Acquisitions and Takeovers Act 1975 (the Act) prohibiting the proposed acquisition by Archer Daniels Midland Company (ADM) of 100 per cent of the shareholding in GrainCorp Limited (GrainCorp).
Since coming into Government, I have made decisions on a number of foreign investment proposals. Those decisions have facilitated a significant amount of new and welcome foreign investment in Australia.
In fact, of the 131 significant foreign investment applications we have dealt with, this is the only application we have prohibited.
ADM’s proposal was first lodged with the Foreign Investment Review Board (FIRB) in May 2013. ADM has withdrawn and re-submitted its application a number of times. The matter was not resolved by the former government before entering into the caretaker period for the 2013 Federal Election.
Given the contentious nature of this application, I have been conscious of addressing the uncertainty surrounding the timing of a decision. Upon assuming this ministry, I reviewed all the available information relating to the application from ADM and formed the view that information on a wider range of issues was required. This included that the FIRB, when considering the national interest, specifically have regard to the impact the decision on this proposal would have on broader Australian support for foreign investment and the foreign investment regime into the future.
Because of these considerations, additional time was required to assess the application. Accordingly, on 4 October 2013, I signed an interim order under the Act to extend the statutory time period for a decision and undertook to make a decision by 17 December 2013.
There is no doubt that foreign investment has underpinned the development of our nation since European settlement. Equally, there is no doubt that we must continue to attract the strong inflows of foreign investment that the economy requires. Without it, Australia’s output, employment and standard of living would all be lower.
The proposed acquisition of GrainCorp by ADM has been one of the most complex cases to come before the FIRB and it is one of the most significant proposed acquisitions of an agricultural business in Australia’s history.
In their response to my request for advice on the wider ramifications of this case, the members of the FIRB could not agree on a consensus recommendation in relation to the proposal.
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.
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.
But, although a number of new players have entered the market and new infrastructure (such as the Newcastle Agri Terminal) is being built, it is still taking some time for increased competition to emerge. Owning over 280 up‑country storage sites and seven of the ten 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 per cent of eastern Australia’s bulk grain exports are handled through GrainCorp’s ports network.
Many industry participants, particularly growers in eastern Australia, have expressed concern that the proposed acquisition could reduce competition and impede growers’ ability to access the grain storage, logistics and distribution network. Given that the transition towards more robust competition continues and a more competitive network is still emerging, I consider that now is not the right time for a 100 per cent foreign acquisition of this key Australian business.
A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community. I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally.
This would not be in our national interest.
I note that, earlier this week, ADM publically released details of enhanced commitments in respect of its proposal. ADM had foreshadowed these to me and the FIRB some time ago. The FIRB consideration and my decision have been made in full knowledge of such further commitments.
The Act provides scope for me to impose conditions when making foreign investment decisions. I carefully examined this option, but consider that there are no appropriate conditions that would mitigate the national interest concerns associated with the proposed acquisition. Indeed, imposing conditions would have meant introducing additional regulation for one market participant, and this would not be in the interests of the Australian grains industry. Moreover, imposing enduring conditions on just one participant in a changing industry would limit the capacity of that participant to respond to a changing environment.
ADM has advised me that it wishes to be involved in the Australian market place for the long term.
ADM currently owns 19.85 per cent of GrainCorp. It was open to me, under the Act, to continue to cap ADM’s shareholding in GrainCorp at its current level. I have decided not to do so.
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 per cent. This would also provide a platform for ADM to build stakeholder support for potentially greater participation in the Australian industry as it develops.
The Australian Government recognises that our nation needs foreign investment so that we continue to grow and prosper.
We will continue to welcome and support foreign investment that is not contrary to our national interest.