Grain handler Viterra Inc. has agreed to be acquired by Switzerland-based Glencore International in a $6.1-billion deal that will see much of the business remain in Canadian hands.
Chris Mahoney, director of agricultural products at Glencore, said Tuesday that the company will use Viterra (TSX:VT) to build its business in North America.
“We will make Regina the platform for our North American agricultural operations and in the future we will look to expansion, with Regina as the headquarters, into the United States,” he said Tuesday.
Glencore will pay $16.25 per share for Viterra.
Calgary-based Agrium Inc. (TSX:AGU) and privately held Richardson International, based in Winnipeg, will then in turn buy the majority of Viterra’s Canadian assets for $2.6 billion in cash.
Viterra shares were down five cents at $15.91 in afternoon trading on the Toronto Stock Exchange. The shares were at about $11 before the takeover interest was revealed more than a week ago.
Mahoney downplayed the regulatory hurdles faced by the deal, including a review under the Investment Canada Act which will test the takeover to see if it is of net benefit to Canada.
The Competition Bureau also will be reviewing the proposed deals, said spokesman Greg Scott.
“It is difficult to say how long a particular review will take, as the bureau evaluates the steps that need to be taken on a case-by-case basis. As always, we work to complete our reviews as expeditiously as possible,” he said.
The takeover offer comes as the company is poised to benefit from the end of the Canadian Wheat Board’s monopoly on the marketing of wheat and barley in Western Canada.
Mahoney noted the deal will strengthen Agrium and Richardson as well as give Canadian farmers better access to world markets through Glencore.
“We will be excellent custodians of the assets. We will keep them state of the art. We will bring in worldwide best practices... We will certainly invest to expand that infrastructure as necessary,” Mahoney said.
“I think those things combined will provide a net benefit.”
Part of the agreement also includes keeping Viterra’s North American head office in Regina, a key concern of Saskatchewan Premier Brad Wall.
A union that represents workers at Viterra, however, raised concerns.
“The prospect of dismantling Viterra as part of this takeover is a grave concern for the people who have sacrificed mightily to sustain and build this enterprise,” said Hugh Wagner, general secretary of the Grain and General Services Union.
“There is still the prospect of hundreds of jobs being at risk or lost in the Regina head office. Added to this is the risk of significant job loss in the country and maintenance operations as the corporate suitors realign their commercial operations to extract surplus from what they purchase.”
The NDP’s agriculture critic worried the takeover would reduce farmers’ choices to market, process and handle their grains.
“Consolidating the grain industry into the hands of a few companies hurts Canadian farmers,” NDP MP Malcolm Allen said in a release.
“We’re calling for the Conservative government to review any deal to make sure that Canadian jobs and farmers are protected.”
Under the deal, Agrium will pay $1.8 billion to buy the majority of Viterra’s retail business, including its 34 per cent interest in Canadian Fertilizer Ltd. Its shares rose 2.9 per cent to $88.20 in afternoon trading on the TSX.
“We believe our crop production services retail business can provide significant value for Canadian farmers and that it provides an opportunity for growth in a market where we currently have a limited retail presence,” Agrium president and CEO Mike Wilson said in a statement.
“The transaction is an excellent fit with Agrium’s stated strategy of growing across the value chain by expanding both our retail and wholesale operations.”
Richardson International will pay $800 million for 19 grain elevators and associated crop input centres as well a 25 per cent ownership interest in the Cascadia Terminal in Vancouver.
Richardson will also takeover a terminal in Thunder Bay, Ont., the Can-Oat Milling business and 21st Century Grain Processing, which has an oat processing plant in South Sioux City, Neb., and a wheat mill in Dawn, Texas.
“Our agreement with Glencore will enhance both our grain handling and processing capacities, and help meet the growing needs of farmers in Western Canada,” said Curt Vossen, president of Richardson International.
Viterra, formed by the merger of the Saskatchewan Wheat Pool and Agricore United, is a grain handler, marketer and food processor with operations across Canada, the United States, Australia, New Zealand and China.
The transaction will require approval by two-thirds of the votes cast at a meeting of Viterra shareholders expected to be held in May.
Alberta Investment Management Corp., Viterra’s largest shareholder with a roughly 16 per cent stake or about 60 million shares, as well as Viterra’s directors and senior executives have agreed to support the deal.
If the deal does not close for regulatory reasons, Glencore has agreed to pay Viterra $50 million.