Brian Hayward can identify with the managers and shareholders of ABB Grain Ltd.
The Australian company is the target of a possible takeover bid by Viterra, Canada’s largest grain company.
Two years ago, Hayward was in a similar position as chief executive officer of Agricore United.
That company was the target of a successful takeover by Saskatchewan Wheat Pool, a combination that created Viterra.
Hayward said he’s not surprised at Viterra’s move and he expects it will be successful.
“My own gut feeling is Viterra has a game plan to put in place an international network for merchandising and trading and I think there will be a deal,” he said.
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However, what happens between now and then is impossible to predict.
“It could be a friendly deal, or a white knight could emerge, or it drags on and Viterra drops the gloves and goes directly to shareholders in a hostile bid,” he said.
At the end of the day, he added, the success of proposed mergers and acquisitions boils down to value, especially how much cash is on the table.
The directors of ABB and Viterra have a legal responsibility to act in the best interests of shareholders.
For ABB’s directors that means ensuring their shareholders receive full value for the company. For Viterra’s board, it means not overpaying.
Hayward said most people he has talked to in the industry see the proposed transaction as providing marginal value to Viterra.
“It’s not something where everybody goes, ‘wow, that’s a great move.’ “
However, he acknowledged there are benefits in diversifying sources of grain and being able to obtain canola from either country.
“You can credibly say to Japan or China you’ll be a more reliable supplier,” he said.
Sylvan Charlebois, an associate professor in the faculty of business administration at the University of Regina, said the move fits well with Viterra’s stated business strategies.
The company wants to expand, and there are few opportunities within Canada’s mature grain market.
He said the deal that resulted in the creation of Viterra shows the company’s strategy is to become a major player around the world.
“It makes sense to position yourself as a buyer, not a seller,” Charlebois said. “It’s clear in Viterra’s mind they want to buy, not be bought.”
He added many companies around the world are undervalued because of the global recession, and ABB is in a particularly vulnerable position because of a recent drought in Australia.
Charlebois said he wouldn’t be surprised if the proposed takeover became a political issue in Australia, as would be the case in Canada if a foreign multinational made a bid to take over Viterra.
Murray Fulton, an expert in agricultural marketing at the University of Saskatchewan, said it can be a challenge to manage a company from halfway round the world.
