In a major international anti-trust lawsuit, Australia’s government moved to block the acquisition of GrainCorp by Archer Daniels Midlands. GrainCorp is the largest seller of grain in Australia, while ADM is the largest producer of corn in the world. The move, according to Australian treasurer Joe Hockey, “would not be in our national interest.” The government did however allow ADM to increase its stake in Graincorp from 20% to 24.9%.
This move comes in the wake of public pressure from farmers, who fear a concentration of market power in the sale of grain, which would threaten their livelihoods and independence. For its part, ADM maintains that the “acquisition of Graincorp would have created value for shareholders…, grain growers and the Australian economy.” The move also reflects national concerns in the face of an increasingly globalized world economy. In particular, the Australian government felt that ceding almost complete control of the Australian grain market to foreign entities by allowing the acquisition would be dangerous for Australia.
This story illustrates one of the key facets of mergers and acquisitions; namely, that government permission often is the deciding factor in whether firms can merge. It also demonstrates the way in which the global economy is increasingly concentrating into the hands of fewer players, which leaves the question of how will world governments respond to this concentration going forward?