Despite seemingly unfavourable developments in recent weeks, Viterra says its purchase of Australian grain company ABB Grain is on track.
“Things are going as planned,” chief operating officer Fran Malecha said last week.
“We are confident in the transaction (and) we remain confident this will proceed to a successful conclusion.”
In May, Viterra bid $1.4 billion in cash, shares and dividends to buy ABB, one of Australia’s leading agribusinesses.
The deal would create a major international player with access to significant volumes of grain throughout the year and a strong presence in international markets.
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In particular, it would provide Viterra with vastly improved access to growing and lucrative markets in Asia.
The fate of the proposed transaction will be determined by a vote of ABB shareholders, with the results to be announced Sept. 9 at a meeting in Adelaide.
Shareholders were recently sent a “scheme booklet” providing a detailed description of the proposed deal and outlining benefits and risks.
The booklet reiterates that the deal has the unanimous support of ABB’s board of directors and includes a report by independent expert KPMG that describes Viterra’s offer of $9.11 to $9.41 Aus per share as fair.
ABB’s shares were trading at $7 on April 29, when news of the takeover bid was made public.
Malecha noted the transaction has received the necessary approvals from Australia’s grain and business regulators throughout the lengthy process.
But recently there have been a few bumps in the road:
- The sudden departure of ABB Grain managing director Michael Iwaniw, who retired at the end of July, led farm leaders and commentators to publicly wonder whether he had become unhappy with the takeover. Just a few weeks earlier, ABB had announced Iwaniw would stay on to see the deal through to completion.
Malecha dismissed these concerns, saying Iwaniw had announced his plans to retire before Viterra’s offer and it was unrelated to the takeover deal.
- Austock Group, a prominent financial services company in Australia, last week expressed doubts about whether the deal would receive shareholder approval, citing the departure of Iwaniw and the earlier resignation of director Andy Barr. The company downgraded ABB’s share rating to sell from hold and said the deal has a 20 percent chance of being approved, down from 60 percent.
“I think growers will think there is something amiss,” said Austock analyst Paul Jensz.
- On Aug. 6, the Australian Competition and Consumer Commission (ACCC) rejected a proposal by three grain companies, including ABB, to provide access to their export terminals for other shippers. It said plans submitted by the three companies, each of which holds a port monopoly in different regions of the country, need more “clarity and transparency” and ordered them to submit new proposals.
Malecha said the ACCC’s decision was not a surprise, and Viterra views it as part of the normal course of events in restructuring the deregulated Australian grain industry.
- Concerns have been raised about the financial aspects, Viterra’s long-term plans for country elevators and the impact on competition for farmers’ business.
Malecha said Viterra has been running an extensive information campaign to inform growers and shareholders about its business structure and the benefits it can bring to ABB, such as its expertise and experience in selling agricultural inputs.
“We’ve been pleased with the feedback we’ve received from not only the investment community but also the growers down there,” he said.
