Making progress | Pending regulatory approvals, Glencore’s $6 billion deal could be complete this summer
The proposed $6 billion takeover of Canada’s largest grain handling company could be complete by the end of July.
Viterra officials confirmed last week that a friendly takeover by Switzerland-based commodities trader Glencore International could be a done deal before the end of the 2011-12 crop year.
The company added that exact transaction dates are not certain and timelines could change pending necessary regulatory approvals in Canada, Australia and elsewhere.
The proposed deal, which would see a wholly owned subsidiary of Glencore acquire all issued and outstanding common Viterra shares for $16.25 per share, cleared two more critical hurdles last week.
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On May 29, Viterra shareholders gave overwhelming support to the deal, voting 99.8 percent in favour of a special resolution approving the takeover.
Two days later, Viterra announced that the Ontario Superior Court of Justice had issued a final order approving the transaction in accordance with the Canada Business Corporations Act.
Steve McKinnon, a spokesperson for Glencore, said the deal still needs approvals from other regulatory agencies in Canada and abroad.
“The Competition Bureau in Canada has issued a no action letter and there will be no action coming in the U.S., so it’s sort of methodically crossing all these analysis hurdles worldwide but they are not yet all in.”
In Canada, an Investment Canada review has yet to happen. That includes a net benefit test, which determines if a proposed transaction is likely to be a net benefit to the Canadian economy.
The deal also needs approvals by the Foreign Investment Review Board and must comply with laws and regulations in foreign jurisdictions.
Viterra’s estimate of a July transaction date appears to be a reasonable estimate, McKinnon added.
“They have said that they expect the deal to close in July, subject to unforeseen delays … so that’s sort of the public estimate that’s out there.”
In South Australia, where Viterra owns more than 100 grain collection sites and seven grain export terminals, the deal is subject to a review by the Australian Competition and Consumer Commission (ACCC).
Last week, a newspaper based in Adelaide reported that the South Australian government’s Select Committee into Grain Handling had contacted the ACCC, suggesting that conditions be imposed on the deal, including locating the head office in Adelaide, forcing Glencore to sell some assets, and making infrastructure upgrades.
In Western Canada, reaction to the Viterra shareholders’ approval was mixed.
Stephen Vandervalk, an Alberta grain farmer and vice-president of the Western Canadian Wheat Growers Association, said his organization has no concerns about the deal’s effect on grain handling.
However, producers are concerned about the deal’s impact on fertilizer production, distribution and farm retail operations, he added.
The Glencore deal includes a side arrangement that would see a significant portion of Viterra’s western Canadian assets transferred to two other Canadian companies.
Calgary-based Agrium would pay $1.8 billion to acquire the majority of the farm retail assets, as well as a 34 percent stake in Canadian Fertilizer Limited, a nitrogen fertilizer manufacturer based in Medicine Hat, Alta.
In addition, Winnipeg-based grain handler Richardson International would pay about $900 million for processing facilities and a 23 percent share of Viterra’s Canadian grain handling assets.
The side deals are subject to a separate review by the Competition Bureau.
Terry Boehm, president of the National Farmers Union, said the May 29 shareholders’ vote was a “grim footnote in the history of large farmer-controlled grain handling co-ops.
“(The) shareholders vote … marks a sad day for Canadian farmers,” he said.
“Instead of farmers earnings equity dividends like we once did, we will be paying for these assets again through handling charges that Glencore will collect.”
Viterra officials declined to comment on whether a July transaction date would result in any significant changes on Viterra’s operation after Aug. 1.
