Glencore, Richardson, Agrium divide up Viterra

by World Grain Staff
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REGINA, SASKATCHEWAN, CANADA — After weeks of speculation, Viterra Inc. announced on March 20 that Glencore International plc plans to acquire the company for C$16.25 per share.

In addition, Agrium, Inc., will acquire a majority of Viterra’s Agri-products business upon completion of Glencore’s acquisition of Viterra, and Richardson International will acquire a portion of Viterra’s Canadian grain handling assets.

The purchase of Viterra is not conditional on Glencore's agreements with Agrium or Richardson International being completed.

Along with Glencore, it had been rumored in media reports that Archer Daniels Midland, Richardson, Agrium, and Cargill were interested in Viterra. The end of Canada’s single desk grain marketing monopoly has resulted in a flurry of interest in the region.

Viterra said it has signed a definitive agreement with Glencore to acquire all of the issued and outstanding shares of Viterra by way of a court approved plan of arrangement. The transaction price represents a premium of 48% over Viterra's closing share price on the Toronto Stock Exchange of C$10.98 on March 8, the day prior to Viterra's announcement that it had received expressions of interest regarding a potential transaction, and 55% over Viterra's 20-trading day volume weighted average trading price of C$10.48 per share ending on March 8.

The transaction values Viterra's equity at approximately C$6.1 billion on a fully diluted basis. The transaction will be funded out of Glencore's existing cash resources and available credit facilities.

"The acquisition of Viterra reflects our strong belief in the importance and future potential of the Canadian and Australian grain markets,” said Chris Mahoney, director of Agricultural Products of Glencore. This is an exciting opportunity to deliver the real benefits that can be generated through the combination of Glencore's and Viterra's respective assets, people and know-how to both farmers and customers in Canada, Australia and further afield."

The acquisition of Viterra is consistent with Glencore's strategy of strengthening its position as one of the global leaders in grain and oilseeds markets, Glencore said. Viterra's Tier 1 portfolio of assets in Canada and Australia will allow Glencore to build upon its position as one of the world's largest commodity suppliers and provides the opportunity to leverage Glencore's extensive global networks, expertise and best practices in order to create additional value across its agricultural businesses.

"Viterra employees created a world-class agri-business, of which I am very proud,” said Mayo Schmidt, Viterra's president and chief executive officer (CEO). “This has been recognized by Glencore and its partners, and this transaction creates value and opportunities for employees, our communities, farmers and customers in all the markets we serve."

Under Glencore’s agreement with Agrium, Agrium will acquire the majority of Viterra's retail agri-products business including its 34% interest in Canadian Fertilizer Limited (CFL) for which Agrium will pay C$1.8 billion in cash, subject to specified purchase price adjustments, including payment for working capital.

Agrium said in its own news release that it will acquire approximately 90% of Viterra’s Canadian retail facilities, all of its Australian retail facilities, as well as their minority position in a nitrogen facility located in Medicine Hat, Alberta.

Richardson International will acquire 23% of Viterra's Canadian grain handling assets, certain agri-centers and certain processing assets in North America for C$800 million in cash, subject to specified purchase price adjustments, including payment for working capital.

Glencore's agreements with Agrium and Richardson International will be described in the information circular to be mailed to all Viterra shareholders in connection with the transaction and the agreement with Agrium will be filed on SEDAR under Agrium's profile at www.sedar.com.

Commenting on the deal, Mike Wilson, Agrium's CEO said, "The proposed transaction is an excellent fit with Agrium's stated strategy of growing across the value chain, allowing us to grow both our Retail and Wholesale operations. We believe that our Crop Production Services Retail business can provide significant value for Canadian farmers and that this opportunity will provide growth in a market where we currently have a limited retail presence."

"Our agreement with Glencore will enhance both our grain handling and processing capacities, and help meet the growing needs of farmers in Western Canada. This expansion of our operations is consistent with our focus on growing our business while nurturing strong relationships with our customers, suppliers and communities," said Curt Vossen, president of Richardson International.

Glencore said it is confident the acquisition of Viterra will deliver significant overall benefits to grain farmers. The transaction will give farmers access to Glencore's unparalleled global distribution channels and increase their ability to export their product into international grain and oilseeds markets. Glencore's global reach and expertise will provide farmers with strong protection from market volatility, more options to market their grain and oilseeds and more competitive pricing resulting from Glencore's wider markets access and its more consistent demand for grains and oilseeds.

Glencore's logistics network enables it to deliver grain and oilseeds to more regions more efficiently, and its balance sheet strength enables the company to buy greater volumes. This results in a more consistent demand profile and therefore greater pricing continuity for farmers.

As a result of the asset sale agreements Glencore has entered into with Agrium and Richardson, the transaction is expected to result in the creation of a more robust competitive landscape for Canadian farmers. As appropriate, Glencore also intends to grant third party access to its handling infrastructure at prevailing market rates.

Viterra shareholders will be asked to vote on the transaction at a special shareholders meeting currently expected to be held in May 2012. The completion of the transaction requires the approval of two-thirds of the votes cast by shareholders present in person or by proxy at the meeting. The transaction is expected to close during Viterra's fiscal third quarter. Full details of the transaction will be included in an information circular to be mailed to Viterra shareholders in accordance with applicable securities laws.

The plan of arrangement will extend to holders of Viterra CHESS Depository Interests (CDIs) listed on the Australian Securities Exchange. Details of how holders of CDIs will be able to vote in respect of the plan of arrangement will also be provided in the information circular.

A copy of the arrangement agreement, the plan of arrangement, the information circular and related documents will be filed with Canadian securities regulators and the Australian Securities Exchange and will be available at www.sedar.com.

Glencore recently announced a recommended all share merger of equals with Xstrata plc. The proposed merger is separate and distinct from the transaction and will have no impact on the transaction.


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