#acquisition#trade#Sumitomo Corporation#GrainCorp#grain#ADM#Alan Winney#Emerald Grain

Japanese company acquires Emerald Grain

|Feb 11|magazine7 min read

The Sumitomo Corporation has acquired Emerald Grain, Australia’s fifth-largest grain trading company. Sumitomo bought the remaining 50 percent stake early February ; it first invested in the company in 2010.

Former chairman and founder Alan Winney said it was the right time for the sale, as the company was having a hard time raising local capital to fund its future expansion goals. Emerald had announced its plans to double the amount of grain it buys from 10,000 Australian farmers previous to the sale. Emerald was also interested in buying or building a second and third port. Winney made it clear that Sumitomo could more easily fund these next steps in Emerald’s growth.

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"I have found local financial institutions reluctant to invest in agriculture and I don't think anything has changed,” Winney said. “There is a great opportunity and potential for Emerald to expand but with limited access to capital, it was clear it was time for the original owners to get out of the way and give our global partner the opportunity to grow the business."

The Australian Foreign Investment Review Board (FIRB) and federal government approved the sale, this coming after its controversial rejection of Archer Daniels Midland Company’s (ADM’s) offer to buy the remaining stakes in GrainCorp in November of 2013. This decision prompted a record drop in shares and a slide in the local economy, and was the first time an American company was blocked from buying Australian assets. 

Both FIRB and the Australian Competition and Consumer Commission have made it clear they have no concerns about the acquisition, which was not the case with the ADM/GrainCorp deal. Sumitomo already owned a 50 percent stake in Emerald grain; ADM currently holds only a 19.9 stake in GrainCorp. Treasurer Joe Hockey did not believe that ADM’s takeover was in national interest, also doing so would have given ADM control of 280 storage sites and seven of the ten ports that ship grain from Australia’s east coast. He would have allowed the company to raise its stake in GrainCorp to 24.9 percent however.

Sumitomo’s already large share in the Emerald Grain, in addition to the FIRB’s determination to avoid a sizeable negative impact on share trading and the local economy, contributed to its successful acquisition of the company. From Winney’s perspective, this can only mean good things for the company he founded.