CALGARY — Viterra Inc. announced Monday that it is in exclusive talks with an unidentified potential buyer and analysts said a reported three-way deal led by Switzerland’s Glencore International appears to be a likely outcome.
The Regina-based grain handler (TSX:VT) confirmed last week it had established an auction process and acknowledged reports that said offers would need to be at least $16 per share.
Several names have been kicked around as possible bidders for Viterra. Reports have said commodities trading firm Glencore is poised to make a bid with the help of Calgary-based Agrium Inc. (TSX:AGU) and Winnipeg agribusiness Richardson International.
Scotiabank analyst Christine Healy wrote in a note to clients Monday that such an offer would be tough to beat.
“We believe such a deal could be financed and would gain the required regulatory approvals,” she wrote.
She said not many bidders would be willing to offer more than $16 per share for Viterra — a deal that would value the company at around $6 billion.
It’s unlikely U.S. agribusiness Archer Daniels Midland and Bunge would want to risk their credit ratings or dilute their stock for such a big acquisition.
“While ADM may be able to bid $16 per share, we believe it would need the proceeds from asset sales to maintain a strong balance sheet. We do not think Bunge, Louis Dreyfus, Cargill, or Noble Grain are contenders at that price.”
A deal that would see Glencore buy Viterra and then sell its retail division to Agrium Inc. and other parts to Richardson makes sense, said Morningstar analyst Jeffrey Stafford.
“I think it could be a win for Agrium if the price is right,” he said.
The larger the retail footprint, the more bargaining power Agrium would have with crop input providers that supply its stores, he said.
Agrium did a similar deal in Australia in 2010 when it bought AWB Ltd. for $1.1 billion.
Shortly after the deal closed, Agrium sold a large chunk of AWB to U.S. agribusiness giant Cargill Inc. Agrium was mostly drawn to AWB’s retail business and decided to shed the grain trading and handling portion of the company.
Viterra’s grain handling and food processing business would be a good fit for a company like Bunge, but Stafford said the price is likely too rich.
“For Bunge, you have to think about diluting the stock, taking on a lot of debt. They’re just not in a cash position to make much of a dent on $6 billion. I think that makes them a little bit less likely as a bidder when it all shakes out.”