BREAKFAST DEALS: Food bowl upset

Warren Truss pressures the FIRB over ADM's GrainCorp bid, while it's Nine's last day to make a play for Cricket Australia.

Warren Truss, Australia’s deputy prime minister in waiting, has put the blowtorch on the Foreign Investment Review Board to look at the bid for GrainCorp. Australia’s agribusiness policy needs to be looked at through more prisms than FIRB. Meanwhile, Elders is coming under more pressure to sell its rural services and automotive parts businesses, Nine Entertainment has waited until the final delivery to make a play for the next cricket broadcasting rights and the size of the paycheck that Aussie Home Loans founder John Symond got from the Commonwealth Bank of Australia has finally been revealed.

GrainCorp, Archer Daniels Midland

Nationals leader Warren Truss has turned up the heat on the Foreign Investment Review Board to reject the $3 billion bid for GrainCorp from US giant Archer Daniels Midland.

Truss, who is likely to be Australia’s deputy prime minister come September, emphasised over the weekend the importance of GrainCorp to Australian farmers while taking some big swings at the board for its interpretation of ‘national interest’ in regards to agribusiness.

“We want the national interest to be carefully assessed,” said Truss in an interview with ABC television, before explaining just how powerful GrainCorp is as a grains exporter. 

“Now, if that sale proceeds, foreign interests will control all the grain handling facilities, the grain ports in Queensland, New South Wales, South Australia and all but half of one in Victoria.”

Truss also sought to juxtapose Australia’s ambition to be a food bowl for Asia with the growing proportion of foreign ownership of our agribusiness assets.

The Coalition has announced plans to increase the membership of FIRB to seven and slash the value level at which its approval is required from $244 million to $15 million. More members would be needed for a lot more work.

In regards to the members that a Coalition government might want to see elevated, Truss appeared to suggest that there was a level of ignorance on the current board when it comes to agribusiness deals.

“It does surprise me that there’s never been a case that the board felt was not in the national interest. You know, for instance, they actually agreed to a takeover of 100 per cent of the Australian rice industry. Now, if it was thought that having no Australian ownership on the Australian rice industry was a good thing when will they ever say no?”

It looks like Truss is referring to FIRB’s approval of a $610 million takeover offer put to Ricegrowers Australia by Spain’s Ebro. Shareholders later rejected that offer in May 2011.

The comparison to Ricegrowers isn’t really like-with-like. The $610 million headline price does not compare favourably with GrainCorp’s $3 billion offer. And while shareholders did reject the Ebro offer, the Spaniards had to get over a high bar.

Also, it was the weakest of rejections from grower-shareholders. The Ricegrowers voting records on the Ebro offer show that, with a 75 per cent minimum of both class-A and class-B shareholder approval required, the class-A ‘yes’ vote came in at 67 per cent and class-B came in at 76 per cent.

GrainCorp’s growers might legitimately be concerned about a foreign entity preventing access to infrastructure and storage facilities, even though both GrainCorp and ADM have said this won’t be a problem.

But Truss can only awkwardly invoke the concept of national interest in regards to FIRB’s approval of “a takeover of 100 per cent of the Australian rice industry” when a majority of the company’s rice grower-shareholders wanted precisely that.

Additionally, ADM doesn’t own any export terminals in Australia so the infrastructure ownership dynamic will not change at all.

This also speaks to a strange set of standards that we’re currently dealing with where foreign investment is heavily scrutinised but agribusiness industry monopolies are allowed to continue.

“We often talk about wanting to be the food bowl of Asia,” said Truss. “But if in fact all out major agribusiness is owned by foreign interests, well it won’t be our decision about being the food bowl of Asia.

“That decision will be made in board in America, in Europe, in Asia or even in New Zealand. And I think that is an issue we need to consider very carefully when we’re talking about what is our national interest and our wish to drive our own destiny as a nation.”

Impassioned words, no doubt. The problem is that ADM is tilting for GrainCorp because it is buying into the prospect of Australia becoming Asia’s foodbowl. It’s not as if they’re spending $3 billion simply to shut those strategically crucial export terminals down.

Admittedly, if you were to replace ADM with a Chinese state-owned entity this would be a very different discussion. Although in that instance, Truss could quite easily watch FIRB knock back an agribusiness bid.

Elders

Elders managing director Malcolm Jackman didn’t have a great time on Friday when he unveiled a $303 million interim loss that was plagued by some unexpected writedowns.

The day before the loss was announced, rival Ruralco received approval from the Australian Competition and Consumer Commission to acquired Elders’ rural services arm.

That’s assuming Ruralco wins the footrace. The company has a chequered recent history with Elders.

Elders is also in the process of trying to offload its automotive parts business Futuris in the wake of Ford Motors’ decision to kill its manufacturing base in Australia.

All this is weighing heavily on Jackman, who is being advised by Greenhill, as some believe the Elders wind-down process would be more swiftly completed under the protection of bankruptcy.

Nine Entertainment, Cricket Australia, iSelect

It’s the last ball of the session.

Nine Entertainment is understood to have held a board meeting over the weekend where the issue of whether to match Ten Network’s $500 million bid for the next Cricket Australia broadcasting rights contract.

The deadline is today.

All indications are that Nine will hold on to the rights that have been a staple for the network for over three decades. But the high price has helped drive some generational change in the way cricket will be broadcast in this country.

Firstly, reports indicate that Ten will end up with the Big Bash League broadcasting rights, which makes sense given the unashamed pitch to younger viewers that is 20/20 cricket.

Secondly, Nine is likely to try to refresh its commentary stalls, with ageing legends Richie Benaud and Bill Lawry gradually winding back their duties, not to mention the passing of Tony Greig late last year.

Nine boss David Gyngell is trying to keep a few balls in the air to make sure the network hasn’t overcommitted itself, with negotiations apparently continuing with WIN Corporation billionaire Bruce Gordon over the potential acquisition of its Adelaide and Perth stations – pending some legislative changes.

The network is required by Cricket Australia to be capable of serving a national audience.

Nine is set to pick up about $40 million from the float of health insurance comparison website iSelect, according to The Australian Financial Review. That’ll make for some handy coin.

iSelect is due to list on the ASX late this month and, encouragingly, expects revenue in 2013 to rise 9 per cent to more than $120 million.

While it’s not a blockbuster IPO at $215 million, investment bankers will be keeping a very close watch on the iSelect float.

If the stock responds well it could help rekindle some appetite amongst retail shareholders, many of which are still feeling a bit burnt by the Myer float.

Yes, that was way back in late 2009. But at $2.45, Myer shares are still trading at a nightmarish discount to the original $4.10 issue price.

A strong debut from a recognised brand could work wonders on Australian investors.

And speaking of Myer, the department store is supposed to be having a look at Aussie fashion brand Lisa Ho. The label collapsed earlier this month with liabilities of $11 million.

Wrapping up

Aussie Home Loans founder John Symond had a solid payday from the buying of his remaining stake in the group by Commonwealth Bank of Australia.

Documents released by Commonwealth on Friday revealed that Symond picked up a $185 million stake in the nation’s most valuable lender.

Staying with banking, Suncorp is picking up strong interest from suitors eyeing off its “bad bank,” according to sources that have spoken to The Australian.

Suncorp boss Patrick Snowball didn’t give shareholders much about the “review” of the bad bank lending book, which is being wound down.

And finally, Gina Rinehart’s Hancock Prospecting is reportedly investigating a tilt at copper plays in Peru as part of its strategy to move beyond its Pilbara iron ore assets.

According to The Australian Financial Review, Peru’s Minister of Energy and Mines Jorge Merino confirmed that he has met with Hancock executives, claiming that Hancock is “very interested” in copper opportunities in his country.