ADM Announces Package of Enhanced Commitments for GrainCorp Acquisition
November 26 2013 - 8:00PM
Business Wire
Pledges additional A$200 million investment in
agricultural infrastructure
Addresses pricing, access, stocks
information
Archer Daniels Midland Company (NYSE: ADM) today announced a
package of additional commitments related to its proposed
acquisition of GrainCorp Limited (ASX: GNC). Key elements of that
package are:
- An additional A$200 million investment
to strengthen Australian agricultural infrastructure, with specific
emphasis on rail enhancement projects;
- Price caps on grain handling charges at
silos and ports;
- Commitment to grain infrastructure
access for growers and third parties;
- Commitment to “open access” regime for
port services;
- A grower and community advisory board
with representation from New South Wales, Victoria and Queensland,
as well as regular public grower consultation; and
- Support for expanded grain stocks
information arrangements.
“Throughout our effort to secure approvals for our proposed
acquisition of GrainCorp, we have worked constructively to create
value for grain growers and the Australian economy as well as
shareholders of GrainCorp and ADM,” said Ian Pinner, president, ADM
Grain. “We have had substantive discussions with growers,
policymakers and other stakeholders, and we’ve been committed to
finding common ground and developing solutions that address issues
and opportunities that have been raised.
“Taking into account the feedback we received, we are committing
to a further package of investments and initiatives to help ensure
that Australian agriculture is able to serve a key role in meeting
growing global demand.
“These commitments are in addition to the existing capital
expenditure and other commitments we have set out in our Bidder’s
Statement, which included a A$50 million enhancement to GrainCorp’s
planned capital expenditure over the next few years. The additional
capital investment that ADM will bring to GrainCorp represents a
100 percent increase in GrainCorp’s original A$250 million capital
expenditure budget prior to ADM’s proposal. Taken together, the
capital investments ADM has committed to support or make for the
GrainCorp business total A$500 million.”
ADM is making commitments in the areas of:
Pricing and cost
- Increases in GrainCorp’s overall grain
handling and storage charges will be capped to inflation for a
period of three years.
- In the case of silo handling charges,
this will be measured by CPI (consumer price index); and
- In the case of port-based handling
charges, this will be measured by AWOTE (average weekly ordinary
time earnings).
Access and competition
- GrainCorp’s port services will be
operated in accordance with the current “open access” regime and
the mandatory industry code of conduct when finished.
- Current access arrangements will be
continued for GrainCorp’s upcountry silos. This means:
- Continuing to provide, to GrainCorp and
third parties, access to GrainCorp’s operational upcountry storage
and transportation services;
- Continuing to make available, to third
party grain marketers, available storage capacity at GrainCorp’s
operational receival sites; and
- Continuing to ensure that prices for
grain for delivery at all GrainCorp receival sites, which are
operational at the relevant time, remain available to growers.
Investment in grain handling and infrastructure
- A$50 million of new investment will be
committed to strategic expenditure in the GrainCorp business in the
next few years. This is over and above the A$250 million program of
investment announced by GrainCorp in November 2012.
- Average annual expenditure on
maintenance and improvement of GrainCorp’s existing portfolio of
assets of between A$40 million and A$60 million.
- An additional A$200 million of capital
expenditure will be exclusively committed to GrainCorp’s Storage
and Logistics business, and its associated infrastructure, over the
next three to five years. The priority of this capital expenditure
will be transformative rail projects that improve supply chain
efficiencies, specifically in areas like:
- Upgrading the silo network to
efficiently handle unit (40 wagon) trains to increase rail capacity
and improve efficiency;
- Work with rail providers to invest in
new generation wagons to increase rail capacity and improve
efficiency (increasing rail wagon payloads from the current net
55-60T per wagon);
- Enhancing silo and grain receival site
efficiencies and handling capability across the network to reduce
turnaround time;
- Working with governments to secure the
future of branch lines by agreeing to co-invest in silo rail
capability on these lines; and
- Constructing new grain handling and
storage locations in areas where investment is needed to improve
the services to growers.
- A proposal to Government on the
establishment of a rail infrastructure fund with the following
features:
- The allocation of seed funding from
ADM’s announced infrastructure investment;
- The provision for matching funding from
the Commonwealth; and
- The ability for other governments,
businesses and individuals to invest in the fund.
Access to stocks information
- GrainCorp will commit to sign up to an
industry-agreed protocol for reporting wheat stocks information
held at an aggregate level of feed or milling grades by port
zone.
- GrainCorp will play an industry
leadership role in encouraging other participants to do
likewise.
Management and engagement
- The headquarters of GrainCorp will
remain in Sydney. Its CEO, who will have oversight of all of
GrainCorp’s operational decisions, will be based in Sydney and will
be supported by GrainCorp’s senior management team.
- A grain marketing team will be
maintained in Australia to maximise the opportunities for
Australian grains and growers, while leveraging the company’s
international marketing network.
- A Grower and Community Advisory Board
will be established, which will include at least four growers (at
least one each from NSW, Victoria and Queensland), at least one
person with a strong connection to regional/rural community
organisations, and senior GrainCorp management.
- A bi-annual consultation forum with
Grower Organisations will also be established, the objective of
which will be to:
- Address the priority issues of concern
to growers in relation to the activities of GrainCorp;
- Discuss any industry-wide policy and
reform proposals which are proposed by government to assist
GrainCorp in formulating a position; and
- Discuss GrainCorp’s community
initiatives and how they can better meet the needs of growers.
“In the competitive global grains market, it makes sense to
operate the most efficient supply chain and maximize utilization of
every location and asset,” Pinner added. “These investments and
commitments—developed following extensive input from Australian
stakeholders—will help ensure the GrainCorp network remains an
attractive option for growers and third-party grain traders, and
also remains a competitive source for global grain buyers.”
The commitments described above would be put into effect upon
the closing of ADM’s proposed acquisition of GrainCorp.
About ADM
For more than a century, the people of Archer Daniels Midland
Company (NYSE: ADM) have transformed crops into products that serve
vital needs. Today, 30,000 ADM employees around the globe convert
oilseeds, corn, wheat and cocoa into products for food, animal
feed, industrial and energy uses. With more than 265 processing
plants, 460 crop procurement facilities, and the world’s premier
crop transportation network, ADM helps connect the harvest to the
home in more than 140 countries. For more information about ADM and
its products, visit www.adm.com.
Archer Daniels Midland CompanyMedia
RelationsJackie Anderson, 217-424-5413media@adm.com
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