Agricore United wants to make it as easy as possible for shareholders to sell their stock – at least initially.
The largest grain company in Canada is establishing a program to help former shareholders and members of Agricore divest themselves of ownership in the new company formed by the merger of Agricore and United Grain Growers.
Agricore shareholders and equity-holding members received 20.5 million shares in Agricore United when the merger was completed Nov. 1.
At the time of the merger, the shares were valued at $12.27 each, representing a total equity investment of nearly $252 million.
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Farmers who don’t want a piece of the new company will be offered a low-cost, hassle-free way to get rid of their shares.
Instead of hiring a broker and setting up an account, they simply have to indicate in writing that they don’t want the shares. That way they can avoid paying brokerage fees.
There will be a charge to sell the shares through the assisted sales program but it will be minimal.
“Probably in the pennies per share,” said Brian Hayward, chief executive officer of Agricore United.
The company will accumulate the unwanted shares and market them as a block through a Canadian investment bank.
He said the same thing was done when UGG and Saskatchewan Wheat Pool went public.
“It’s a tried and true kind of methodology.”
Hayward said the service was requested by Agricore’s board of directors, which worried that many members didn’t have brokers and wouldn’t want to go through a complicated and expensive process to sell their shares.
Dominion Bond Rating Service analyst David Schroeder thinks that is a plausible explanation, but he also believes Agricore United wants to know how many shares will be put up for sale so it can pass that information to prospective buyers.
One company that may be interested in purchasing a block of shares in the new company is American grain marketing giant Archer Daniels Midland.
ADM’s 42 percent ownership stake in UGG became a 19 percent investment in Agricore United after the merger. But the company has the right to increase its piece of the pie to 25 percent within 20 business days of the merger date.
Schroeder said ADM will likely be keen to do just that, but it depends how many shares farmers are willing to sell and when they want to sell them.
Even if the American firm can’t get its hands on a big block of Agricore United shares during the initial 20 days, it still has the opportunity to increase its ownership to 45 percent in the coming months and years through share offerings.
“They get first crack at those shares,” said Hayward.
He wouldn’t comment on the likelihood of a share offering happening anytime soon but it is an option the board is considering.
That possibility was mentioned in the News release
news announcing completion of the merger.
The release states that additional sources of funding may be required to take advantage of “attractive investment opportunities in the Canadian agri-business industry” and that in the next several months the board may consider a treasury offering of limited voting common shares to raise that capital.
Schroeder said ADM’s interest in Agricore United is as a supplier of grain for its American and Canadian mills. But he said it doesn’t necessarily have to own a majority of the company to gain influence over how decisions are made.
It already has the right to appoint two members to Agricore United’s 15-member board of directors.
Former shareholders and equity-holding members of Agricore should receive a letter in the mail this week informing them of the number of shares they have in Agricore United and outlining the assisted sales program.
Those who decide to keep their shares will be mailed new certificates in late November.
