GrainCorp deal stirs agri-interest

As GrainCorp looks likely to be swallowed up by US commodities company Archer Daniels Midland, attention is turning to which agribusiness could be the next takeover target, with animal feed provider Ridley Corporation heading the list.

Australian agribusiness stocks are in focus after GrainCorp finally backed ADM's $2.8 billion takeover offer. The move on GrainCorp followed foreign acquisitions of other agribusiness majors in recent years including AWB and ABB Grain.

Ridley, which sold its Cheetham Salt business last year to Hong Kong-based CK Life Sciences, was the next potential target, Commonwealth Bank analyst Jordan Rogers said. He also nominated Bega Cheese as having attractive assets.

Ridley has been a takeover target of GrainCorp. The stockfeed maker rejected GrainCorp's $415 million offer in 2008.

BBY analyst Dennis Hulme said Ridley would be attractive to international grain traders such as ADM as it had relationships with some of its final customers.

At the same time, companies such as Bega, which has assets in Victoria and southern New South Wales, were well positioned to tap into the growth in the demand for dairy in Asia, analysts said.

"What China is very low on in consumption per capita is dairy," one analyst said.

"And it's growing rapidly, and Australia and New Zealand are the two lowest-cost producers of dairy products.

"Bega Cheese is majority owned by dairy farmers so we don't think they are a takeover target in the short term ... but in the longer term, there are assets that would be desirable for an Asian food company or an international dairy company."

More generally, food production needs to increase by 70 per cent by 2050 to meet global demand, the UN's Food and Agriculture Organisation estimated in a report.

"The security of supply is a big issue. This is not a new theme, but it's accelerating as populations are growing faster and resources are fixed," another analyst said, adding that breads and spreads supplier Goodman Fielder was another possible takeover candidate.

Dairy producer Warrnambool Cheese and Butter— was also seen as desirable.