Anatomy of a deal | Company statements swing from business as usual to ‘expressions of interest’ from third parties
Brian Hayward has been a part of many Canadian grain industry wheelings and dealings but he has never witnessed one like Glencore’s acquisition of Viterra.
As the former chief executive officer of United Grain Growers and Agricore United, Hayward has played a role in three hostile and several friendly takeovers.
But this one left him shaking his head.
“I find it bizarre how the chief executive officer of (Viterra) is on television on Friday saying, ‘nothing is going on,’ and within a matter of days there’s a deal done and the board is 100 percent endorsing it,” said Hayward.
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Viterra CEO Mayo Schmidt told reporters on March 9 during a conference call about the company’s first quarter results for 2012 that Viterra had not been approached by anyone about buying Canada’s largest grain handler.
A few hours later Viterra issued a news release acknowledging it actually had received “expressions of interest from third parties.”
By March 20 Viterra was announcing that a deal had been reached with Glencore International.
Hayward spoke to a dozen institutional investors who all shared his bewilderment with the seemingly rapid nature of the deal.
Typically, companies in these situations try to drag out the process to generate competitive bids. The short timeline from an expression of interest to a sale didn’t make any sense to Hayward.
Schmidt told reporters during a conference call held the day after the purchase announcement that the sale wasn’t nearly as hasty as it appeared.
“What is seen in the public is the very tail end of a long process,” he said.
It dates back many months and involves a lot more players than the Swiss commodity trader.
The company fielded inquiries from many “aggressive buyers” around the globe, said Schmidt.
“All the parties were given ample opportunity to put their best foot forward, to log their interest with the company through a rigorous process that was run by our board of directors.”
But according to Leo de Bever, chief executive officer of Viterra’s largest shareholder, Alberta Investment Management Corporation (AIMCo), it was a quick process.
“In the last couple of months the rumour mill was doing overtime and it became obvious that something was up but we didn’t know exactly what.”
He said it was only a couple of weeks before news broke about the expression of interest that the potential bidders “came out of the woodwork” and a week after that that the bids became serious.
Curt Vossen, president of Richardson International, said work was going on behind the scenes for months. Richardson met with Glencore back in October when the company came to Winnipeg for meetings.
“We got into a conversation and that led to a discussion on whether or not this would make some sense on a joint venture basis,” he said.
“We began constructing how that would happen and what it would look like and what different interests both parties would have. Subsequent to that Agrium was brought into the equation.”
De Bever said in addition to the Glencore bid, there were a couple of other international grain companies and a sovereign wealth fund that expressed interest in Viterra.
“At the end of the day there were about three bids that made some sense and could be compared,” he said.
Viterra’s board felt Glencore’s bid offered the greatest benefits for the company, its employees and its customers around the world.
Glencore’s cash bid of $16.25 per share was 48 percent over Viterra’s closing price on the Toronto Stock Exchange on March 8, the day before Viterra’s announcement that it had received expressions of interest.
Hayward thinks Richardson was one of the biggest winners in this deal.
“I think it’s going to be great for the company and kudos to them,” he said.
The company also fared well in Saskatchewan Wheat Pool’s 2007 takeover of Agricore United.
Richardson was allowed to buy 15 grain elevators and nine farm supply centres from the pool in exchange for abandoning its bid for Agricore United.
“Brilliant is probably maybe too strong a word but (Richardson) has executed extremely well,” said Hayward.
