Selling off the farm: Ridley could be next

As GrainCorp looks likely to be taken over by US commodities company Archer Daniels Midland, speculation is mounting as to which Australian agribusinesses could be the next takeover targets. Animal feed provider Ridley Corporation heads the list.

Agribusiness stocks are in the spotlight after GrainCorp finally gave its backing to ADM's $2.8 billion offer. The move on GrainCorp follows foreign acquisitions of other agribusiness majors in recent years, including AWB and ABB Grain.

Ridley, which sold its Cheetham Salt business to Hong Kong's CK Life Sciences last year, was the next likely potential target, Commonwealth Bank analyst Jordan Rogers said. Bega Cheese had attractive assets for potential buyers, he said.

Ridley was once 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 like ADM because it had relationships with some of its end customers.

At the same time firms like Bega Cheese, which has assets in Victoria and southern NSW, were well-positioned to tap into the rising demand in Asia for dairy products, analysts said.

"What China is very low on consumption per capita is dairy, and [that's] growing rapidly. Australia and New Zealand are the two lowest-cost producers of dairy," one analyst said.

"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," the analyst said.

More generally, food production needs to increase by 70 per cent by 2050 to meet global demand, the United Nations' Food and Agriculture Organisation estimates.

"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.

Warrnambool Cheese and Butter - in which the Murray Goulburn Co-operative recently increased its stake, and of which Bega Cheese owns 17 per cent - is also regarded as a desirable asset.

BBY's Mr Hulme said he expected rising Asian demand to add about 0.5 per cent to 1 per cent to agribusinesses' profits. "It's going to be long-term. It's a positive industry dynamic, but I would expect it be at a modest increment to the growth you might otherwise see," he said.

On Friday, GrainCorp's board provided backing for ADM's sweetened takeover offer.

Under the US company's offer, GrainCorp shareholders will receive $12.20 per share, with a further $1 per share to be paid in dividends.