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More Aussie takeovers expected as global demand for food rises

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With a proposed acquisition of GrainCorp firmly in the pipeline, industry speculation is pointing towards further Australian agribusiness takeovers.

As Archer Daniels Midland (ADM) seeks to close the takeover of GrainCrop, industry experts are contemplating which Aussie business will be next. Many have suggested that animal feed provider, Ridley Corporation, could be a likely candidate.

According to the Financial Review, agribusiness stocks are in demand after GrainCrop gave its backing to ADM’s $2.8 billion offer.

The purchase of GrainCrop follows foreign acquisitions of other key players including AWB and ABB grain.

According to Commonwealth bank analyst, Jordon Rogers, Ridley is in the spotlight due to the recent sale of its Cheetham Salt business to Hong Kong-based CK Life Sciences. 

Dairy producer, Bega Cheese, is also said to be targeted due to its attractive assets in Victoria and Southern NSW, and Asia’s growing appetite for dairy products.

“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.

The United Nations’ Food and Agriculture Organisation has estimated that food production must increase by 70 percent by 2050 in order to meet global demands, a claim which is continuing to fuel the increased value of agricultural businesses worldwide.

Another industry analyst has said that securing supplies is a major issue as populations are growing rapidly and resources are fixed.

Other Aussie businesses said to be on the hit list include Goodman Fielder and Warrnambool Cheese and Butter. BBY analyst Dennis Hume believes that rising Asian demand could add between a 0.5 and one percent increase in agribusinesses’ profits based on long term forecasts. 

Image courtesy of Nosha via flickr

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