Viterra’s acquisition | ‘It was eat or be eaten, and I guess in this case we got eaten,’ says AIMCo
Viterra was in the midst of attempting a sizable acquisition when it received a friendly takeover bid from Glencore, says Viterra’s largest shareholder.
“We were contemplating the same thing that Glencore is contemplating now — gobbling up the competition,” said Leo de Bever, chief executive officer of Alberta Investment Management Corporation (AIMCo)
“It was eat or be eaten, and I guess in this case we got eaten.”
Viterra’s target was another international grain handling company.
“I’d rather not get into specifics, but it was a big acquisition,” he said.
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There were rumours that Viterra was after Gavilon, an American energy and grain trader.
AIMCo encouraged and played a key role in financing Viterra’s 2009 purchase of Australia’s ABB Grain Ltd. for $1.5 billion.
The company was ready to invest up to $1 billion in additional capital to help Viterra take the next step in becoming one of the world’s top five grain companies.
However, Viterra faced some challenges in its latest takeover attempt.
“I can’t say too much, but there were some regulatory issues,” said de Bever.
He lamented being unable to fulfill his company’s goal of transforming Viterra into a true global grain handling powerhouse.
“It’s too bad that the building up of Viterra’s capacity didn’t start earlier because if it had we might be on the other side of the (Glencore) transaction,” he said.
He dismissed allegations that AIMCo prompted the sale to Glencore.
In November, AIMCo succeeded in getting one of its representatives appointed to Viterra’s board of directors after publicly expressing a lack of confidence in the board’s ability to run a growing international agribusiness.
Critics say AIMCo, which manages $70 billion of pension and endowment assets for Alberta’s public service, was looking to make a quick buck by selling off Canada’s largest grain company to a foreign owner.
“That certainly wasn’t our first choice,” said de Bever.
However, Glencore’s offer was simply too good to pass up both in terms of the bid of $16.25 per share and the partnership with Richardson International and Agrium Inc., Glencore’s two Canadian partners, which should go a long way toward appeasing regulators.
“Roughly speaking, we doubled our money,” said de Bever. “It’s very unusual to do that in two years.”
That’s why he decided to support the deal, entering into an agreement with Glencore to endorse the transaction. AIMCo owns 17 percent of Viterra.
The deal requires approval from two-thirds of the votes cast by shareholders at a special meeting to be held in May.
“Given a choice between a course of action that would have generated a very solid return in about five years versus one where I could capitalize on that investment right away, I really couldn’t do anything different from what I did,” said de Bever.
He regrets losing AIMCo’s foothold in the western Canadian agriculture business. De Bever has seen studies saying the demand for high protein food will be up 70 percent in 15 years.
Other studies predict Canada, Ukraine, Kazakhstan, Argentina and Australia will be the only five net grain exporting regions of the world by that time.
“That’s why AIMCo has been so interested in agriculture and we’re still interested in agriculture. We think this is a sector where Western Canada has an under-utilized resource base,” he said.
