U.S. multinational snaps up 10% of Graincorp: what’s next?

Foreigners may find targets in other food producers

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Graincorp (ASX: GNC) has been placed in a trading halt following an approach from U.S.-listed agribusiness Archer Daniels Midlands (ADM). ADM has a market capitalisation of US$19 billion and extensive worldwide grain interests — including a presence in Australia where it sells ingredients to food and beverage producers and supplements for animal feed and industrial products.

Given the similarities of ADM’s operations to those of Graincorp, this is definitely a strategic move by ADM to expand operations within the Asia Pacific region. ADM also owns a stake in Singapore-listed Wilmar International, which in turn owns 10% of baker Goodman Fielder (ASX: GFF).

With both AWB and ABB now under foreign control, a takeover of Graincorp will remove the last of the listed grain businesses from the ASX. (Investors can still indirectly purchase ABB via the depositary interests of Viterra Inc (ASX: VTA), but perhaps not for much longer given Glencore has made an approach to Viterra.)

With the rise of living standards in Asia, Australia is in an exciting position to reap the rewards of our competitive advantage in food production. While the market action to date has been in the grain sector, there are a number of other listed food producers that could appeal to foreigners. These include:

  • Beef producer Australian Agricultural Company (ASX: AAC), which has a strategic asset in the form of its significant rural land and water holdings.
  • Salmon farmer Tassal Group (ASX: TGR), which owns and manages fish hatcheries in Tasmania and has invested heavily in technologies to improve the efficient and lower the cost base of its operations.
  • Bega Cheese (ASX: BGA), a major processor of dairy for both wholesale and retail markets with a growing export business into Asia.
  • Warrnambool Cheese and Butter Factory (ASX: WCB), which, like Bega, is a major processor of dairy products to customers both domestically and internationally.

Foolish takeaway

Identifying a long-term theme is one way to search out potential investments. Three themes that could potentially provide investors with opportunities are: the aging population both here in Australia and globally, the continual shift to online services, and the increasing demand in Asia for foods high in protein.

If you only invest in one company this year, make it our “Top Stock for 2012-13.” Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading:

Motley Fool contributor Tim McArthur owns shares in Goodman Fielder and Tassal. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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