Glencore eyes Viterra in $6.1B deal

Swiss-based Glencore International (GLEN-L) has tabled a friendly $6.1-billion cash bid for Saskatchewan-based grain handler Viterra (VT-T, VTA-A).

The commodities trader, which recently proposed a US$90-billion merger with Xstrata (XTA-L), plans to sell most of Viterra’s Canadian assets to Agrium (AGU-T, AGU-N) and Richardson International for a combined $2.6 billion in cash.

The offer, which was applauded by Viterra’s board, values the company at $16.25 per share, representing a 48% premium over the closing price for March 8. This is the day before Viterra announced that it received “expressions of interest” from third parties.

The takeover of Viterra, which is a leading global agri-business and food ingredients company, will allow Glencore to boost its existing presence in the global grain and oilseeds markets.

“The acquisition of Viterra reflects our strong belief in the importance and future potential of the Canadian and Australian grain markets,” said Chris Mahoney, Glencore’s director of agriculture products, in a prepared statement.

Glencore says the transaction will provide benefits to Canadian grain farmers, by allowing them to access its global distribution channels and increase their ability to export their products into international markets. Glencore adds its global reach will protect farmers from market volatility, giving them more options to market their products, and at more competitive prices.

The trading giant plans to sell Viterra’s retail agri-products business, including its 34% interest in Canadian Fertilizer, to Agrium for $1.8 billion in cash.

“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,” commented Agrium’s CEO, Mike Wilson, in a statement.

Glencore intends to sell 23% of Viterra’s Canadian grain handling assets, as well as certain agricentres and processing assets in North America to privately-owned Richardson International for $800,000.

Once the deal is approved, Glencore will consolidate Viterra’s executive offices in Saskatchewan, making the Regina head office the centre of its North American agriculture operations.

If Viterra walks from the deal it will pay Glencore a termination fee of $185 million, and if Glencore does the same it would pay Viterra a $50-million reverse break fee.

The takeover bid still requires shareholder and regulatory approvals, and is unlikely to impact Glencore’s tie-up with Xstrata.