It’s now up to shareholders of ABB Grain to decide if a proposed takeover by Regina-based Viterra Inc. will proceed.
Details of the $1.4 billion Cdn acquisition were released in Adelaide and Regina May 19.
Shareholders, the Australian court and regulatory agencies in both countries must approve the deal.
Viterra chief financial officer Rex McLennan told reporters in Regina that should all happen by mid-September.
Both companies’ boards of directors have unanimously endorsed the deal.
The combination of the two companies, both leaders in their countries, is expected to lead to annual synergies of $30 million Aus.
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“With our combination, the resulting geographic diversification will mean strategic access to high growth markets and additional customer opportunities, particularly in southeast Asia and China,” McLennan said.
The transaction is a combination of cash and shares, called scrip in Australia. ABB will pay a special 41 cent dividend on completion of the deal.
Shareholders would also receive an 18 cent tax-exempt dividend called a franking credit.
Shareholders have three options and receive both dividends regardless of what they select.
The default option, valued at $9.26 per share, includes $4.35 in cash, $4.50 in scrip (or .4531 Viterra shares) and the dividends.
The all cash option, valued at $9.11, includes $8.70 in cash and the two dividends.
The all scrip option, worth $9.41 per share, is comprised of $9 in scrip (0.9062 Viterra shares) and the two dividends.
Andrew Muirhead, senior vice-president of corporate development, said the transaction is based on Viterra’s closing share price of $8.84 on May 15.
There are caps on both the cash and scrip options.
McLennan said ABB shareholders will soon receive a document explaining the transaction and choices.
“A vote of the ABB shareholders will subsequently be held and for the transaction to close, support of 50 percent of ABB shareholders by number and 75 percent by share value is required,” he said.
Australian growers hold 45 percent of the shares in ABB.
If approved, the deal will result in a company of 5,000 employees worth $10 billion a year.
McLennan said the expected synergies would come from applying best practices and “leveraging each other’s respective grain flows.”
Viterra, for example, loads 300 ships each year while ABB loads about 200.
“We will be able to take advantage of shipping logistics and arbitrage by jointly running those operations and serving those customers,” said McLennan.
He added the transaction is fully financed from cash on Viterra’s balance sheet and equity raised in April.
“It doesn’t involve any additional external borrowing,” he said.
After the announcement, Dominion Bond Rating Service placed the BBB (low) rating of Viterra’s debt under review with developing implications.
ABB brings about $400 million Aus in debt to the deal.
“DBRS believes the enhanced scale and diversification that would result from the proposed transaction, combined with balanced financing, should enable Viterra to maintain its overall credit risk profile, which remains within the range of the current rating category,” said a company release.
“At this point, DBRS believes that Viterra management is committed to carrying out its growth strategy in a measured, disciplined and financially balanced manner.”
McLennan added that the transaction moves Viterra into a market that is just starting to go through the consolidation Canada has already seen.
“Australia is more deregulated than the Canadian market, but it’s far less consolidated in the sense of rationalizing the industry to provide efficiencies,” he said.
“So what we aim to do is use this as a platform to work towards further consolidation and driving efficiencies in the Australian agribusiness sector.”
