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Viterra Opens Up for Bidding War; Shares Jump

Thursday, 15 March 2012 05:07 PM

Canada's largest grain handler, Viterra, said on Thursday it has opened its books to potential buyers, setting the stage for a possible bidding war and sending its shares 10 percent higher.

Viterra said it has established a process for considering expressions of interest, including confidentiality agreements.

It shed no light on who might bid, but a person familiar with the matter said that Swiss-based Glencore and U.S.-based Bunge and Archer Daniels Midland were involved in the auction.

"This is a public company, it won't take that long to resolve an outcome," the person said.

Another person said that Glencore made a very strong case to support an acquisition. "They have given a lot of thought to this. They are very motivated," the second source said.

The Financial Times said Glencore was teaming up with two Canadian companies, grain handler Richardson International and fertilizer company Agrium Inc on a joint bid.

A Richardson spokeswoman said the company would not comment on speculation, while ADM and Bunge declined to comment. An Agrium spokesperson could not be immediately reached.

Viterra, based in Regina Saskatchewan, stands to gain from a government decision to end the Canadian Wheat Board's monopoly on Western Canadian wheat and barley sales, as the change will let grain handlers buy wheat and barley for milling or export directly from Prairie farmers for the first time in 69 years.

That means a buyer would win access to Canada's prized canola, spring wheat, oats and durum wheat supplies. Canada, the world's No. 8 grains producer, is the leading exporter of each crop.



Teaming up with Canadian players would likely help Glencore navigate the politically charged federal review process if it goes through with a bid.

A foreign takeover of Viterra would be subject to a federal government review to determine whether it is of "net benefit" to the country, although the takeover is likely to be less contentious than a 2010 foreign bid for fertilizer giant Potash Corp, which the government eventually vetoed.

Viterra shares jumped to just over C$16, the price tipped as the floor for a takeover in an unconfirmed report on website dealReporter.com. The stock was at around C$11 before talk of a takeover first circulated last week.

A bid of C$16 a share would value the company at about C$5.9 billion ($5.94 billion).

Viterra, which said it had engaged financial and legal advisers, said it was aware of media reports of takeover interest at C$16 per share. But it urged caution.

"Viterra cautions investors not to rely on these press reports as there can be no assurance that a transaction will occur and that if one does occur, there can be no assurance at what price it will be completed," it said in a statement.

Jason Zandberg, who follows Viterra for PI Financial Corp, said the dealReporter report said Viterra was asking suitors to promise to bid C$16 a share before it would let them examine its financial position.

He did not know how credible the dealReporter report was, and said he had never heard of a company asking prospective bidders to agree to a floor price before they even inspected their target's books.

"It's sounding as though there are multiple parties at least rolling up their sleeves," Zandberg said. "Whether they put in a bid, we don't know."

Viterra shares closed up 9.8 percent, or C$1.44, at C$16.09 on the Toronto Stock Exchange, touching a nine-year high.

The shares have increased in value by nearly half in the past week as talk of a takeover began to swirl.

"My stock was worth $11 on (last) Thursday," said Ron Mayers, senior vice-president of Laurentian Bank Services. "You think I want to go back? I'm a seller here.

"This company is gone. It's just a matter of price."

Viterra, which competes with Cargill and Richardson, is the only major Canadian grain handler that is publicly traded. It has its roots as the Saskatchewan Wheat Pool, a farmer-owned cooperative.

Along with Viterra, U.S.-based energy and grains trader Gavilon Group is also in play.

Viterra owns about 45 percent of Western Canada's grain-handling capacity and a bid for it by another major Canadian grain player would likely raise competition concerns.

The Financial Times said Viterra would split into three after a successful Glencore/Agrium/Richardson bid, with Glencore taking the grain-handling business, Agrium getting 261 farm product stores and Richardson taking the food-processing business.

($1=$0.99 Canadian)

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Thursday, 15 March 2012 05:07 PM
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