Mayo Schmidt said he’s not surprised by anything that happens in the battle over the future of Agricore United.
The chief executive officer of Saskatchewan Wheat Pool also said last week’s announcement that AU and James Richardson International had reached agreement on a friendly takeover offer didn’t signal the end of the Pool’s hostile takeover bid.
“This was not unexpected by us,” he said, adding it’s typical for the target of a takeover attempt to search out an alternative friendly suitor.
The fact that AU’s board of directors has recommended to shareholders that they accept the JRI proposal hasn’t dimmed Schmidt’s optimism that the Pool will be successful.
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“We certainly remain confident that a Pool proposal can be of more value to shareholders.”
Schmidt said it’s too soon to say whether the Pool would sweeten its offer for AU shares, which expires March 7.
“Now that there is a competing interest in AU, we’ll have discussions with shareholders of AU and look to address what their needs will be,” he said.
“We’ll need that additional information prior to assessing our go-forward plan.”
One market analyst who has been following the story said he expects the Pool to make a new bid.
David Newman of National Bank Financial said the JRI deal provides more value to AU shareholders than the Pool offer.
Given the benefits the Pool could realize from a successful takeover, he expects the company to continue the fight.
“We would expect a sweetened bid from the Pool, given the opportunity to create a leader in an industry on the cusp of deregulation and extract synergies in the process,” he said.
Based on the Pool’s strong balance sheet, he added, it could probably offer the equivalent of about $16 per share, well above its current offer of $12.14 and JRI’s offer of $13.87 (based on his valuation of the mix of shares and cash in the two companies’ bids).
However, he said bidding that high would reduce the benefits the Pool would gain from the transaction.
Newman raised the possibility of the Pool joining with Archer Daniels Midland, which owns 28 percent of AU and has the right to make a competing bid before AU shareholders approve any takeover bid.
Schmidt declined to respond directly to Newman’s comments, saying simply the Pool remains committed to its bid for AU and believes the result would be a stronger, more efficient company than the proposed JRI-AU combination.
He added some analysts have valued the Pool’s bid more highly than JRI, based on factors such as more liquidity in terms of trading shares and the Pool’s superior physical assets.
An official with JRI wouldn’t speculate on what the Pool might do or whether JRI is ready to get into a bidding war for AU.
“We’re not prepared to make any assumptions or to consider what we may or may not do,” he said. “Once (Sask Pool) makes their position clear, then we’ll react accordingly.”
Schmidt said farmers should prefer the Pool’s bid because the board of directors of a Sask Pool-AU combination would include four farmers out of 11 directors. The JRI plan would have two farmers on its 11-member board.
