Agricore United is reassuring customers and clients that it’s not about to go away any time soon.
The company’s chief executive officer says the prospect of what he described as a hostile takeover bid by Saskatchewan Wheat Pool won’t deter AU from pursuing its ambitious new strategic plan.
The company’s shareholders will have the final say over the firm’s future, said Brian Hayward, but in the meantime, managers and employees will remain focused on their existing business goals.
“Agricore United is a strong business with a strong business plan, looking forward to a future as a stand-alone company and getting involved in new and expanded businesses,” he said last week.
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“It’s business as usual, as we evaluate the merits of this offer through a proper, structured, considered process.”
On Nov. 7, SWP announced its intention to make an offer to buy AU, its larger competitor.
The pool is prepared to pay around $1 billion in the form of shares, cash and acquired debt, in exchange for all of AU’s outstanding securities.
The pool received a list of AU’s shareholders on Nov. 17 and will shortly distribute to them a circular describing in detail the bid and the rationale behind it, and asking them to tender their shares to the pool.
AU will then have 10 days to issue a formal response.
The pool has also filed a request with the federal competition bureau, seeking approval for the proposed combination of the two companies.
In the meantime, AU has advised shareholders to hold on to their shares until the company’s board of directors has had time to review the pool’s formal offer and recommend a course of action. It cautioned that nothing will be decided soon.
“There is a long process ahead once we actually receive the offer, including careful review by our board of directors on behalf of our shareholders and other stakeholders, as well as a review by the competition bureau,” the company said in a Nov. 16 open letter to the company’s customers, signed by Hayward and AU chair Wayne Drul.
The company has a number of options: it could recommend acceptance of the pool’s offer; it could reject the takeover bid and fight to remain a stand-alone company; or it could seek an alternative friendly bid from a so-called white knight.
Hayward declined to specifically comment on the pool’s proposal, although several market analysts have described it as inadequate.
SWP chief executive officer Mayo Schmidt disputes that, saying the deal would provide AU shareholders with a 13 percent premium on the value of their shares as of Nov. 7.
“Typically, transactions of this nature do not reflect a premium to either partner,” he said.
Schmidt added that pool officials received a positive response during a trip to Toronto last week to discuss the proposal with the investment community.
“We’ve talked with investors of both companies and they see it as very positive.”
Hayward made a point of describing the pool’s offer as a hostile takeover bid, not a merger, noting there were no serious discussions or exploratory talks to consider things like fair value or competition issues before the pool’s Nov. 7 announcement.
“A merger is a very mutual, co-operative process, not hostile,” he said.
Hayward has dealt with both.
In 1997, as chief executive officer of United Grain Growers, Hayward led the company’s successful effort to fight off a hostile takeover bid by Alberta Wheat Pool and Manitoba Pool Elevators.
Four years later, he was involved in a mutually negotiated friendly merger between Agricore and UGG that resulted in the formation of Agricore United.
In the open letter, Hayward and Drul say the timing and intent of the pool’s offer is not a surprise, saying the pool “wants to be part of our growing momentum and take a piece of our success.”
Schmidt declined to respond to that statement.
The news of the proposed merger has given a boost to AU share prices on the Toronto Stock Exchange, which jumped by about $2 the day of the pool’s announcement and have since remained steady at around $10.20. SWP shares got an initial bump of about 30 cents to $7.23, but have since fallen back to around $7.
