Federal Treasurer Joe Hockey's decision to disallow a takeover bid by US company Archer Daniels Midland (ADM) of GrainCorp Limited could be a missed opportunity for regional Australia, according to Charles Sturt University (CSU) Professor of Economics John Hicks.Mr Hockey, said the case was one of the most complex to come before the Foreign Investment Review Board and one of the most significant proposed acquisitions of an agricultural business in Australia's history.
"For me to reject this proposal, I had to determine that the acquisition of GrainCorp by ADM is contrary to the national interest," he said.
Mr Hockey cited concern from growers in eastern Australia about a possible reduction in competition, and a "high level" of concern from stakeholders and the broader community as reasons for his decision.
"I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally," he said.
"This would not be in our national interest."
But Professor Hicks, from CSU's School of Accounting and Finance, said the benefits to flow from a successful takeover could have outweighed any perceived negative impacts.
"In a free market, where one party, even a foreign party, successfully takes over a company it is because they are prepared to pay more for the shares than anyone else," he said.
"This is generally because they expect to get greater value out of the assets of the company than can the current owners or potential buyers.
"It is in Australia's interest, generally, to have Australian assets used as efficiently as possible and an increase in the efficiency of the use of the asset is what a takeover – even by a foreigner – implies."
ADM currently owns 19.85 per cent of GrainCorp. Mr Hockey said "to encourage ADM to demonstrate its commitment to the Australian grains industry" he was inclined to approve any proposal for ADM to increase that stake up to an interest of 25.9 per cent.
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