Glencore to buy Viterra for $6.1B
Grain handling company Viterra Inc. (TSX:VT) has agreed to be acquired by Switzerland-based Glencore International in a $6.1-billion deal that will see two Canadian partners pick up major parts of the business.
Chris Mahoney, director of agricultural products at Glencore, said Tuesday that the company will use Viterra to build its business in North America.
"We will make Regina the platform for our North American agricultural operations and in the future we will look to expansion, with Regina as the headquarters, into the United States," he said Tuesday.
The deal will see Glencore will pay $16.25 per share for Viterra.
Calgary-based Agrium Inc. (TSX:AGU) and privately held Richardson International, based in Winnipeg, will then in turn buy the majority of Viterra's Canadian assets for $2.6 billion in cash.
Mahoney downplayed the regulatory hurdles faced by the deal, including a review under the Investment Canada Act which will test the takeover to see if it is of net benefit to Canada.
He noted the deal will strengthen Agrium and Richardson as well as give Canadian farmers better access to world markets through Glencore.
"We will be excellent custodians of the assets. We will keep them state of the art. We will bring in worldwide best practices... We will certainly invest to expand that infrastructure as necessary," Mahoney said.
"I think those things combined will provide a net benefit."
Part of the agreement also includes keeping Viterra's North American head office in Regina, a key concern of Saskatchewan Premier Brad Wall.
Under the deal, Agrium will pay $1.8 billion to buy the majority of Viterra's retail agriproducts business, including its 34 per cent interest in Canadian Fertilizer Ltd.
"We believe our crop production services retail business can provide significant value for Canadian farmers and that it provides an opportunity for growth in a market where we currently have a limited retail presence," Agrium president and CEO Mike Wilson said in a statement.
"The transaction is an excellent fit with Agrium's stated strategy of growing across the value chain by expanding both our retail and wholesale operations."
Richardson International will pay $800 million for 23 per cent of Viterra's Canadian grain handling assets, as well as certain agricentres and processing assets in North America.
The assets include 19 elevators and the crop input centres as well a 25 per cent ownership interest in Cascadia Terminal in Vancouver.
Richardson will also acquire a Viterra terminal in Thunder Bay, Ont., the Can-Oat Milling business with oat processing plants in Portage la Prairie, Man., Martensville, Sask., and Barrhead, Alta., and 21st Century Grain Processing, which has an oat processing plant in South Sioux City, Neb., and a wheat mill in Dawn, Texas.
"Our agreement with Glencore will enhance both our grain handling and processing capacities, and help meet the growing needs of farmers in Western Canada," said Curt Vossen, president of Richardson International.
The takeover offer comes as the company is poised to benefit from the end of the Canadian Wheat Board's monopoly on the marketing of wheat and barley in Western Canada.
Viterra, formed by the merger of the Saskatchewan Wheat Pool and Agricore United, is a grain handler, marketer and food processor with operations across Canada, the United States, Australia, New Zealand and China.
The transaction will require approval by two-thirds of the votes cast at a meeting of Viterra shareholders expected to be held in May.
Alberta Investment Management Corp., Viterra's largest shareholder with a roughly 16 per cent stake or about 60 million shares, as well as Viterra's directors and senior executives have agreed to support the deal.
If the deal does not close for regulatory reasons, Glencore has agreed to pay Viterra $50 million.
Shares of Viterra were down five cents at $15.92 in late morning trading on the Toronto Stock Exchange, while Agrium stock was up 2.6 per cent, or $2.25 at $87.99.