The purchase price to be paid by Cargill will be the net asset value of the acquired businesses as at the completion date of the transaction plus a premium. The purchase price will be payable in cash and by Cargill assuming AWB's consolidated indebtedness related to the acquired businesses. The sale to Cargill is expected to be completed in the first half of 2011.
If the transaction had occurred and the purchase price had been determined on the basis of the net asset value of the acquired businesses as at Sept. 30, it is estimated that the aggregate of the net proceeds from the sale of the acquired businesses to Cargill, together with the release of working capital from AWB Harvest Finance Ltd., a finance company that supports the ACM business, would have been approximately A$870 million.
Agrium said that it is continuing to evaluate the disposition of certain other businesses that form part of the commodity management business that are not being acquired by Cargill. The value of these additional businesses is estimated to be approximately A$55 million which, combined with the estimated net proceeds from the sale of the acquired businesses to Cargill and the release of working capital from Harvest Finance, represents a total estimated value of A$925 million for the commodity management businesses Agrium has agreed to, or intend to, divest.
Of this total, approximately A$240 million would represent indebtedness assumed by Cargill related to the acquired businesses.
“We are pleased to have reached an agreement for the sale of AWB’s commodity management business to Cargill, one of the world’s leading grain handlers and traders. Agrium indicated from the outset that we would conduct a thorough review of the commodity business with AWB management, and we believe that this is the best course of action for all stakeholders involved. The combination of AWB’s commodity management business with Cargill will be a significant milestone in the evolution of Australia’s grain industry. We believe it will provide dividends for Australian growers through improved market access, knowledge, relationships, and expertise in the world grain trade and as a result will provide a stronger global marketing presence for Australian crops,” said Agrium’s President and Chief Executive Officer Mike Wilson.
“Agrium is committed to ensuring the commodity management divisions operate on a ‘business-as-usual’ basis in the interim and we will continue to focus on the successful integration of Landmark in a timely and effective manner. Agrium is excited to be in the important Australian agriculture retail market and will strive to realize the full strengths and opportunities that the Landmark business presents for the benefit of the Australian grower.”
Landmark generated EBITDA of A$69 million in the fiscal year ended Sept. 30. Assuming similar performance for 2011, Landmark could generate A$81 million of EBITDA, including synergies of A$17 million and integration costs of A$5 million in the first year. The synergy target for 2012 and beyond is A$40 million or more. The synergies are expected primarily through a combination of enhanced purchasing efficiencies, expansion in product offerings and a reduction in overhead expenses.
Completion of the disposition to Cargill is subject to customary closing and other conditions, including the receipt of all required regulatory approvals.