[miningmx.com] — GLENCORE, the world’s largest commodities trader, is buying Canada’s leading grain handler, Viterra, in a cash deal valuing it at C$6.1 billion ($6.2bn).
Glencore, which is also in the throes of a $36bn takeover of miner Xstrata, already markets and produces crops as well as metals, minerals and oil, but has earmarked agricultural commodities as an area for growth.
It said the deal offers C$16.25 per Viterra share and has been unanimously approved by Viterra’s board. The price, broadly in line with market expectations after days of speculation, is a 48% premium over Viterra’s closing price on March 8, the day before it announced it had received expressions of interest.
Glencore said it would pay for the deal using existing cash resources and credit facilities, but will also lighten the burden by selling the majority of Viterra’s Canadian assets and some others to agri-business firms Richardson International and Agrium Inc for roughly C$2.6bn in cash.
Shareholders accounting for 16.5% of Viterra’s stock, including the company’s largest investor, Alberta Investment Management, have already pledged their support for the deal.
The rest of Viterra’s investors will vote on the deal at a special meeting expected in May.
Viterra will pay Glencore a C$185m break fee if it accepts a better offer from another party, or if its board withdraws or modifies its recommendation.
Glencore would have to pay Viterra a C$50m reverse break fee if the deal does not close for regulatory reasons.
Agrium will acquire the majority of Viterra’s retail agri-products business, including its 34%stake in Canadian Fertilizer, for which it will pay C$1.8bn. Richardson will acquire 23% of Viterra’s grain-handling assets as well as certain processing assets in North America for C$800m.
“The acquisition of Viterra reflects our strong belief in the importance and future potential of the Canadian and Australian grain markets,” Chris Mahoney, Glencore’s head of Agricultural Products, said in a statement.
Viterra had said on Monday it was in exclusive talks with a prospective buyer, but did not identify a suitor.
Analysts have said a deal that splits Viterra three ways is unlikely to disrupt Glencore’s blockbuster tie-up with Xstrata – a prize it has been working towards for years – and was instead a reflection of the trader’s opportunistic approach to acquisitions, as the Canadian Wheat Board’s monopoly on Western Canadian wheat and barley is slated to end this year.
In Viterra, Glencore and partners will acquire the leading Canadian handler of spring wheat, canola, barley and oats.
Glencore describes itself as one of the leading exporters of grain from Europe, the former Soviet Union and Australia. It commanded almost 9% of the global market for grains at the time of its public share offering last May.
Bank of America Merrill Lynch and RBC Capital Markets advised Glencore. Canaccord Genuity advised Viterra, and TD Securities worked for the company’s board of directors.