The Australian government rejected Friday the Aus$3 billion (US$2.7 billion) sale of GrainCorp to American agribusiness giant Archer Daniels Midland (ADM), saying it went against the national interest.
Treasurer Joe Hockey said the sector was still moving towards more robust competition and a foreign takeover of the biggest grain handler in eastern Australia could undermine public support for foreign investment in general.
"Now is not the right time for a 100 percent foreign acquisition of this key Australian business," he said.
The bid met strong opposition from grower groups and the National Party, which is part of the governing coalition that declared Australia "open for business" after winning September elections.
"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community," Hockey said in a statement.
"I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally.
"This would not be in our national interest."
The Treasurer said the Foreign Investment Review Board assessing the proposal had been split on whether to green-light the takeover which was "one of the most significant proposed acquisitions of an agricultural business in Australia's history".
But he had ultimately decided that Australia's grains export industry was still working through a significant deregulation process, which started in 2008 with the abolition of the single desk for wheat exports.
"Although a number of new players have entered the market, and new infrastructure... is being built, it is still taking time, some time for increased competition to emerge," he said.
ADM owns more than 280 storage sites and seven of the 10 grain port terminals in New South Wales, Queensland and Victoria. Around 85 percent of eastern Australia's bulk grain exports are handled through its ports network.
Hockey said growers had expressed concern that the proposed acquisition would reduce competition and impede their ability to access grain storage, logistics and distribution networks.
ADM voiced disappointment at the decision against its proposal, a bid it had sweetened in recent days with an increased Aus$250 million spending on infrastructure.
"We are confident that our acquisition of GrainCorp would have created value for shareholders of ADM and GrainCorp, as well as grain growers and the Australian economy," ADM chairman and chief executive Patricia Woertz said in a statement.
Hockey noted ADM's comments that it wanted to be involved in the Australian marketplace for the long-term and to encourage it he would allow an increase of its shareholding in GrainCorp to 24.9 percent.
Woertz added: "As owner of 19.85 percent of GrainCorp, we will look to work with them to maximise returns on our investment and create value for both companies."
Agriculture Minister Barnaby Joyce, a member of the National Party, welcomed the decision which he said would help protect Australia's food security.
"In the next 50 years, the world will consume more food than it has in the history of humankind on the planet," he told the ABC. "We want to make sure Australia's got the best potential to be a larger player and benefactor of that."
Hockey rejected the suggestion the decision sent a message the government of Prime Minister Tony Abbott was "closed for business", saying the proposal was the only one of 131 significant foreign investment applications dealt with by the government to have been blocked.
"The fact of the matter is we need foreign investment, we welcome foreign investment but it's got to be investment that is not contrary to the national interest," Hockey said.
[Image via Agence France-Presse]