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Glencore in $5.49 Billion Bid for Viterra, Telegraph Says

Glencore Second-Half Profit Declines 29%
The headquarters of Glencore International AG in Baar, Switzerland. Photographer: Gianluca Colla/Bloomberg

Glencore International Plc made a 3.5 billion-pound ($5.49 billion) bid for Viterra Inc., Canada’s largest grain handler, The Sunday Telegraph reported, without saying where it got the information.

The approach prompted a March 9 statement from Viterra, saying the company had received expressions of interest from third parties, the London-based newspaper said.

Chief Executive Officer Ivan Glasenberg wants to add Viterra to Glencore’s expanding grain business even as the trading company seeks to complete a takeover of Swiss metals and coal producer Xstrata Plc, the Telegraph said. Glencore, the largest publicly traded commodities trader, is offering 27.7 billion pounds in stock to acquire Xstrata in what would be the world’s biggest mining takeover.

“Investors would be pleased to see they’re not missing opportunities despite the larger merger,” London-based Fairfax IS analyst John Meyer said in a telephone interview today. “If Xstrata doesn’t happen, they’re getting on with growing the business anyway.”

Holly Gibney, a spokeswoman for Viterra of Regina, Saskatchewan, declined to comment. A spokesman for Baar, Switzerland-based Glencore declined to comment when contacted by Bloomberg News today.

Monopoly Ending

Buying Viterra would give Glencore the largest share of the Canadian grain-handling market just as the Canadian Wheat Board’s monopoly over wheat and barley grown in the west of the country comes to an end. Viterra’s share of Canadian grain-handling may rise to almost 50 percent in the next few years from 45 percent, its Chief Executive Officer Mayo Schmidt said in an interview on March 8.

Viterra said in January it expects to increase grain volumes and earnings after the board’s control of supplies ends. The Canadian government passed a law in December that will end the monopoly and give farmers the choice to sell to other buyers as of Aug. 1.

A deal with Glencore might also help the company’s agricultural business to return to profit after a “difficult year” said Fairfax’s Meyer. Moving into storage of wheat and other logistics beyond just trading grains would likely help boost their margins, he said.

Glencore said Feb. 7 that 2011 adjusted earnings before interest and tax from its agricultural trading unit swung to an $8 million loss from a $659 million profit a year earlier after experiencing an “unprecedented cotton market.”

Gavilon Bid

Shares of Viterra rose 24 percent to C$13.58 in Toronto on March 9 following the company’s statement, boosting its market value to C$5.05 billion. Glencore climbed 0.9 percent to 409 pence in London trading.

As well as being a potential acquisition target, Viterra is considering making a takeover offer of its own. Viterra and Glencore are among companies exploring a bid for U.S. grain-storage company Gavilon Group LLC, people familiar with the matter said March 6.

Gavilon may also bid for Viterra, Fairfax’s Meyer said.

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

Canadian Review

Under Canada’s foreign-takeover legislation, known as the Investment Canada Act, foreign acquisitions of companies with assets worth more than C$312 million ($315 million) are reviewed by the federal government to determine whether the transaction is a “net benefit” to the country.

The federal government should block any foreign takeover of Viterra under that law, just as it did with BHP, Pat Martin, a New Democratic Party lawmaker, said by telephone on March 9.

Richard Walker, a spokesman for Industry Canada, deferred comment to colleagues at Canada’s agriculture ministry. Agriculture Minister Gerry Ritz declined to comment on the possible deal through his spokeswoman Meagan Murdoch.

“What I can say is that western Canadian farmers now have the freedom to market their own grain based on what is best for their own business, whether that’s on the open market or through the viable Canadian Wheat Board,” Ritz said in an e-mail.

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