Agricore United is like the prettiest, most eligible princess in the kingdom.
And the dowries being offered by the suitors vying for her affections keep getting bigger and better.
Last week it was the turn of James Richardson International Ltd. to top the offer made for AU by rival suitor Saskatchewan Wheat Pool.
JRI matched and bettered the April 13 bid by the Pool, with an all-cash offer of $19.25 per share for all of AU’s outstanding common shares, as well as $24 for each preferred share. The total value of the offer was pegged at $1.8 billion.
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That’s slightly greater than the $1.75 billion offer by the Pool, which is a combination of cash and SWP shares, prorated to $14 in cash and 0.66 Pool shares per AU share.
While some investors like to receive shares in such a transaction on the premise that their value may increase, it’s generally conceded that cash is more attractive to most shareholders.
The Pool’s offer carries with it greater market liquidity and the approval of the federal Competition Bureau, contingent upon an already agreed-to swap of assets with Cargill Ltd.
Officials with Sask Pool declined to say last week whether the company would attempt to better the JRI offer, which was accepted by AU’s board of directors pending approval of shareholders.
“The Pool is reviewing the recent announcement by AU and assessing alternatives,” the company said in its only comment.
The Pool made its initial offer to take over AU in November 2006. Since then it has raised the bid three times, the last two in response to an agreement in February by AU to accept a competing offer from JRI.
One big question is whether the Pool, which has gone to the public markets three times, raising $920 million to finance its bid, can afford to up the ante once again in its bid to take over Canada’s largest grain company.
“After three separate subscription receipt financings, we believe the market could be hesitant to pony up more cash for SWP to be ultimately successful,” said analyst Orin Baranowsky of BMO Capital Markets.
AU chief executive officer Brian Hayward said the battle to take over his company reflects the successes enjoyed by AU, which was created in 2001 through a merger between United Grain Growers and Agricore Co-operative Ltd.
“It’s a recognition that we’re doing the right things,” he said.
“If we weren’t executing properly, running the company well and moving things in the right direction, this wouldn’t be happening.”
Hayward added that seven or eight months ago, nothing like this was on anyone’s radar.
“I don’t know of a single person who could have had all this mapped out last November and could say ‘here’s what’s going to happen,’ ” he said.
If the Pool doesn’t re spond with a new offer and the JRI bid is approved by shareholders, the newly merged company would likely be up and running in mid-June.
If the Pool does come back with a better offer, JRI would have the right under its agreement with AU to match or better that offer. If AU accepted a bid from the Pool, it would have to pay JRI a “break fee” of $35 million.
In accepting the JRI bid of $19.25 per share, AU rejected an alternate bid from the company for $20 per share. That bid carried with it the proviso that AU would not be able to consider any future competing offers.
In the next few weeks, AU shareholders will receive circulars from JRI, describing its offer in detail, and from AU’s board of directors, providing its views and recommendations on the JRI bid.
