Glencore's Viterra deal all but sealed
The last vestiges of Canada's iconic farm co-operatives will likely head toward extinction Tuesday when shareholders of Viterra Inc. vote on a takeover bid from Swiss-based Glencore International Inc.
Viterra's roots go back nearly 100 years to the days when farmers across the prairies banded together to sell their grain. That led to the creation of the Saskatchewan Wheat Pool, which, after some acquisitions, became Viterra in 2007.
Today, Viterra is Canada's largest grain handling company with operations in Australia and the United States. It also runs a chain of 258 retail stores across Western Canada selling farm supplies.
Glencore, which is better known as a global commodities trader, made an all-cash offer for Viterra in March worth $16.25 a share, or $6.1-billion in total. To make its bid more palatable to Canadian regulators, Glencore struck side deals with Winnipeg-based Richardson International and Calgary-based Agrium Inc. Under those deals, Richardson will purchase 19 of Viterra's 92 Canadian grain elevators and Agrium will acquire most of Viterra's retail stores.
The Competition Bureau has yet to review the takeover in detail, but so far few objections have been raised and shareholders are expected to vote in favour. The merger has also won the backing of the Saskatchewan government, which famously helped shoot down BHP Billiton's bid for Potash Corp. of Saskatchewan in 2010 by arguing it wasn't in the province's interest. A government-commissioned review of the Viterra deal concluded that it was generally positive for farmers, although it did raise some concerns about Agrium becoming a dominant player in the retail sector.
The bid hasn't come without controversy. Viterra's chief executive Mayo Schmidt denied the company had been approached about a takeover during a television interview on March 9, even though documents show he was quietly running an intense bidding war at the time. Viterra quickly issued a press release that day to say that it had received "expressions of interest." The company's board finally backed Glencore's bid on March 20.
The takeover will give Glencore an instant presence in the North American grain business. And it will offer the company a reliable supply of grains that many believe will be a key part of a booming trade in agricultural commodities in years to come. Glencore has also said that it plans to use Regina as its base for further expansion across North America. That could include buying up major U.S. grain handlers such as Nebraska-based Gavilon Group.