Mayo Schmidt is confident his company will win the race to take over Agricore United.
Saskatchewan Wheat Pool last week revised for the second time its bid to buy AU, putting out an offer it describes as “substantially superior” to one from rival bidder James Richardson International.
The Pool’s new bid is worth $17.86 per AU share, including $8 in cash.
JRI’s bid is worth $13.79,
including $6.50 in cash.
“We believe there is overwhelming support in the marketplace and we fully expect this bid will get us to the finish line,” chief executive officer Mayo Schmidt said in an interview.
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The company also announced it had gained approval for its takeover bid from the federal Competition Bureau, based on swapping a number of assets with Cargill Ltd. if the takeover goes ahead.
AU’s board of directors is reviewing the offer to determine if it’s superior to JRI’s offer. If it decides that it is, then JRI will have five days to match or surpass the Pool’s bid.
A spokesperson for JRI declined to say how his company will respond if AU judges the Pool’s bid to be superior, but made it clear it isn’t about to throw in the towel.
“I don’t think we’ve embarked on this process to not be successful,” said Jean-Marc Ruest, JRI’s
assistant vice-president for legal and industry affairs.
Market analyst Orin Baranowsky of BMO Capital Markets said he expects AU will deem the Pool’s bid to be superior.
“I don’t see why they wouldn’t, given that the cash and equity value would be higher than JRI,” he said.
He expects JRI will respond with a better offer and wouldn’t be surprised if the Pool answers that with a sweeter-still bid.
“I think the Pool has the capacity to go further,” he said.
The Pool is financing the new bid by raising $275 million through a public market subscription. Schmidt said the fact that it sold out in one afternoon shows that the market supports the company’s efforts to take over AU.
The total value of the Pool’s offer is now $1.6 billion in shares, cash and AU debt, up from last fall’s initial offer of about $1 billion.
AU shareholders would receive $8 in cash and 0.95 SWP common shares in return for each AU common share.
Schmidt said as a result of the agreement with Cargill, the new deal would provide savings of $80 million, up from $60 million in the previous offer. The Pool’s bid also provides $172 million in tax shelter against future income, while the JRI deal provides only a “nominal” shelter.
The agreement with the Competition Bureau, which would be implemented if the Pool’s bid for AU is successful, contains the following:
- The new SWP-AU company would sell to Cargill nine country elevators now owned by AU, located at Vermilion, Viking, Blackie, Camrose and
Equity in Alberta, Davidson, Kindersley and Congress in Saskatchewan and Elva in Manitoba.
- Cargill would sell to the Pool its 50 percent stake in Cascadia Terminal in Vancouver, which it operates jointly with AU. That would give the new company full ownership.
- In return, Cargill would acquire the Pool’s Vancouver terminal.
- Cargill would pay the Pool $70 million, plus the value of inventory, in the facilities.
- The Pool would unwind the agreement under which the Pool and JRI jointly manage their terminals at Vancouver.
Schmidt said gaining approval from the competition bureau is a crucial step in its effort to combine SWP and AU into the dominant player in the prairie grain industry.
