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Viterra Sets Up ‘Process’ After Getting Buyer Interest

Viterra Sales Process Underway After Getting Buyer Interest
Viterra, with a market value of C$5.98 billion, is drawing suitors after saying profit and market share will rise after Aug. 1, when wheat and barley farmers in western Canada can sell to groups other than the Canadian Wheat Board. Photographer: Lyle Stafford/Bloomberg

Viterra Inc., the Canadian grain handler that has attracted Glencore International Plc as a potential suitor, has begun a sales process after third parties expressed interest in acquiring the company.

The company has entered into confidentiality agreements and provided due diligence, Regina, Saskatchewan-based Viterra said yesterday in a statement. The shares rose 9.8 percent in Toronto to C$16.09, after the company said press reports of an offer of at least C$16 a share shouldn’t be relied upon.

Viterra, with a market value of C$5.98 billion $6.02 billion), is drawing suitors after saying profit and market share will rise after Aug. 1, when wheat and barley farmers in western Canada can sell to groups other than the Canadian Wheat Board. Barr, Switzerland-based Glencore, the world’s largest listed commodities trader, has expressed an interest in Viterra, a person familiar with the situation said.

“I think 16 dollars is higher than I would have expected,” Jason Zandberg, a Vancouver-based analyst for PI Financial Corp. who rates the shares a buy, said in a phone interview. “But when you have a very strategic asset and multiple bidders for assets that are difficult to duplicate, the price can escalate pretty quickly. Their infrastructure is second to none in Canada.”

‘Advanced Talks’

Archer Daniels Midland Co., Bunge Ltd. and Noble Group Ltd. are in Viterra’s so-called data room after being told they must offer at least C$16 a share, dealReporter said yesterday, citing a person familiar with the situation whom it didn’t identify. Glencore is in “advanced talks” with Agrium Inc. and Richardson International Ltd. about a joint bid for Viterra, the Financial Times said, citing industry executives it didn’t identify. A formal bid may come next week, the newspaper said.

Viterra’s Australian-traded stock climbed 9.3 percent to A$15.26 by the close in Sydney. It has gained 47 percent in Toronto since March 8, the day before Viterra first said it had received interest from third parties.

Viterra said there’s no assurance of a deal or, if there is one, at what price it will be concluded.

The company’s grain elevators and port terminals are well placed in Canada and Australia to serve growing demand from Asia, Zandberg said. Viterra owns more than half the grain-export capacity in Canada and all ports in South Australia, according to the company.

Canada’s Exports

Canada is the fourth-biggest wheat exporter after the U.S., Australia and Russia, according to the U.S. Department of Agriculture.

David Weintraub, a spokesman for Decatur, Illinois-based ADM, said the company doesn’t comment on rumors or speculation. Susan Burns, a spokeswoman for White Plains, New York-based Bunge, declined to comment. Charles Watenphul, a Glencore spokesman, declined to comment.

No one was available to comment at Hong Kong-based Noble’s London office. Todd Coakwell, a spokesman for Calgary-based Agrium, didn’t respond to messages seeking comment. Tracey Shelton, a spokeswoman for Richardson, declined to comment. Richardson is a unit of closely held James Richardson & Sons Ltd., which is based in Winnipeg, Manitoba.

Canaccord Financial Inc. is advising Viterra on the sale process, according to a person with knowledge of the matter, who declined to be identified because that information hasn’t been made public. Jamie Kokoska, a Canaccord spokeswoman, declined to comment in an e-mail, citing company policy.

Viterra forecast March 8 “significant” gains next year, with annual earnings before interest, taxes, depreciation and amortization rising by C$50 million annually after 2014 as market share expands to close to 50 percent from 45 percent.

Takeover Estimates

Cargill Inc., the closely held Minneapolis-based grain distributor, has also expressed interest in Viterra, the Wall Street Journal reported March 11, citing people it didn’t identify.

With estimates for the price of a Viterra takeover ranging from PI Financial Corp.’s C$14.40 a share, to C$18.50 a share from Raymond James Financial Inc., buyers still wouldn’t be paying more than 0.58 times revenue, according to data compiled by Bloomberg.

Viterra’s price-to-sales ratio of 0.46 on March 12 was cheaper than 74 percent of North American agricultural product wholesalers and food manufacturers with market values over $1 billion, data compiled by Bloomberg show. The group traded at an average of 1.02 times revenue.

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