Viterra Gets Expressions of Interest From Third Parties

Viterra CEO Mayo Schmidt
Mayo Schmidt, president and chief executive officer of Viterra Inc. Photographer: Daniel Acker/Bloomberg

Viterra Inc., Canada’s largest grain handler, received expressions of interest from third parties just as the company plans to capitalize on the end of the Canadian Wheat Board’s marketing monopoly.

There can be no assurance that there will be an agreement or a deal, the Regina, Saskatchewan-based company said today in a statement. Paul Tierney, a Viterra spokesman, declined to comment on parties involved. The shares jumped the most in nine years in Toronto.

The Canadian government passed a law in December that will end the CWB’s monopoly and give farmers in the west of the country the choice to sell wheat and barley to other buyers as of Aug. 1. Viterra, formerly known as Saskatchewan Wheat Pool Inc., said in January that it expected to increase its earnings following the change by attracting additional grain volumes.

“With the CWB disappearing, the market’s drawn the interest of a lot of international players, so why not go after the player that has got the biggest market share in Viterra?” Jason Zandberg, an analyst at PI Financial Corp. in Vancouver, said in an interview.

Canadian agricultural supplier Agrium Inc. could bid, John Hughes, an analyst at Desjardins Securities Inc. in Toronto, said in an interview. U.S. agricultural trading companies Bunge Ltd., Cargill Inc. and Archer Daniels Midland Co. may be interested, said Andrew L.B. Hamlin, a money manager at Aston Hill Financial Inc. in Toronto, which oversees about C$5.5 billion ($5.6 billion), including Viterra shares.

Bunge, ADM

“The most interesting of those is Bunge,” Hamlin said in a telephone interview. “They do have some presence in western Canada --they have some canola-crushing plants in Saskatchewan and Alberta -- but they don’t have any grain-handling.”

Susan Burns, a Bunge spokeswoman, David Weintraub, an ADM spokesman, Lisa Clemens, a Cargill spokeswoman, and Todd Coakwell, an Agrium spokesmen, all declined to comment.

Viterra’s share of the Canadian grain-handling market may rise to almost 50 percent in the next few years from 45 percent, Chief Executive Officer Mayo Schmidt said in an interview yesterday. Cargill’s existing share of the grain market may create regulatory issues should it bid for Viterra, Hamlin said.

North American food and agriculture companies have fetched a 31 percent premium on average in takeovers greater than $1 billion, data compiled by Bloomberg show. Using Viterra’s closing price yesterday, that would imply an offer for C$14.38 a share.

‘Unresponsive’ Board

Based on the median 10 times multiple of earnings before interest, tax, depreciation and amortization paid in comparable deals, Viterra may command about C$17 a share, the data show.

Viterra rose 24 percent to C$13.58 as the close in Toronto, giving it a market value of C$5.05 billion. The shares dropped 5.5 percent in the 12 months through yesterday, while the S&P/TSX Consumer Staples Index advanced 2.9 percent.

Alberta Investment Management Corp., the largest Viterra shareholder with a 17 percent stake, in November rejected the grain handler’s proposed board of directors, describing them as “unresponsive.”

The Edmonton, Alberta-based fund said it “does not believe that the current Viterra board has the required skills or expertise to meet the company’s leadership needs as a growing international agribusiness.”

Shauna MacDonald, a fund spokeswoman, declined to comment today.

Efficiency Focus

As well as being the potential target for a bid, Viterra is also considering making a takeover offer of its own. It’s among companies exploring a bid for Gavilon Group LLC, a closely held U.S. grain handler, people familiar with the matter said March 6.

While Viterra is open to opportunities for acquisitions, it’s focused on improving efficiency and utilization of existing assets, Schmidt said yesterday.

Viterra is based in the same province as Potash Corp. of Saskatchewan Inc., which successfully fended off a $40 billion hostile bid from Australia’s BHP Billiton Ltd. in 2010. The Canadian government blocked the offer, saying the sale of the world’s largest fertilizer company wouldn’t provide a “net benefit” to the nation.

The federal government should block any foreign takeover of Viterra under the Investment Canada Act, just as it did with BHP, Pat Martin, a New Democratic Party lawmaker, said by telephone today.

Kathy Young, a spokeswoman for Saskatchewan Premier Brad Wall, declined to comment.

Viterra is in negotiations to give the CWB access to the company’s system of elevators and ports ahead of the end of the monopoly in August, Schmidt also said in the interview.

Viterra said the same day its fiscal first-quarter net income fell 23 percent to C$77.7 million, or 21 cents a share, matching the average of nine analysts’ estimates compiled by Bloomberg.

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