Swiss commodities trader Glencore International Plc (GLEN.L,GLNCY.PK,GLCNF.PK) agreed Tuesday to acquire Canada's biggest grain handler Viterra, Inc. (VT.TO,VTA.AX) for C$16.25 per share in an all-cash deal that values Viterra at about C$6.1 billion.
The offer price represents a 48 percent premium to Viterra's closing share price of C$10.98 on the Toronto Stock Exchange on March 8, the day prior to Viterra revealing receipt of expressions of interest regarding a potential deal.
The deal has the unanimous approval of Regina, Saskatchewan-based Viterra's board, and it has also recommended that Viterra shareholders vote in favor of the deal. The transaction is expected to close during Viterra's fiscal third quarter ending July 31.
Baar, Switzerland-based Glencore is keen on acquiring Viterra in an effort to boost its agricultural business in Canada, one of the world's major grain and oilseeds markets.
The deal will in turn also provide Canadian farmers access to Glencore's global distribution network and boost their ability to export products into international grain and oilseeds markets.
Viterra currently controls 45 percent of Canada's grain handling market. Viterra expects a higher market share once the Canadian Wheat Board's long-running grain marketing monopoly ends in August 2012.
The deal, which would be funded with Glencore's existing cash resources and available credit facilities, is expected to be earnings enhancing to Glencore in the first full year after consolidation.
The deal is primarily subject to approval of two-thirds of the votes cast by Viterra shareholders present in person or by proxy at a special shareholders meeting currently expected to be held in May 2012.
Meanwhile, the holders of 16.5 percent of Viterra shares have entered into agreements with Glencore to vote their shares to support the deal. These include shares held by Alberta Investment Management Corp., the largest shareholder of Viterra, and directors and senior officers.
The agreement also provides Glencore the right to match any superior bid, and includes a break fee of C$185 million, payable to Glencore if Viterra agrees to a superior offer or Viterra quits the deal. Meanwhile, it also provides for a reverse break fee of C$50 million, payable to Viterra if no closing due to regulatory reasons.
Following the closure of the deal, Glencore will consolidate Viterra's executive offices in Saskatchewan and make the Regina head office the platform for its North American agricultural operations and for expansion into the U.S. Glencore expects to grow the Canadian business and anticipates ongoing investment in the Canadian operations.
Meanwhile, in a parallel deal, Agrium, Inc. (AGU, AGU.TO) and privately-held Richardson International Ltd. have agreed to acquire the majority of Viterra's existing Canadian operations in a combined cash deal of about C$2.6 billion.
The parallel deal will see Agrium buying the majority of Viterra's retail agri-products business including its 34 percent interest in Canadian Fertilizer Ltd. for C$1.8 billion in cash. It will also see Richardson buying 23 percent of Viterra's Canadian grain handling assets, certain agri-centres and certain processing assets in North America for C$0.8 billion in cash.
However, the companies noted that the Glencore-Viterra deal is not conditional on Glencore's agreements with Agrium or Richardson being completed.
In Tuesday's regular trading session on the LSE, GLEN.L is currently trading at 412.65 pence, down 7.80 pence or 1.86% on a volume of 9.24 million shares. VT.TO is trading on the TSX at C$15.90, down C$0.07 or 0.44% on a volume of 30.06 millions shares.
by RTT Staff Writer
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