Buzz that a major Canadian agribusiness would make a play for the former Australian Wheat Board wasn’t far off the mark.
But where the industry thought Regina grain handler Viterra may try to outbid Australia’s GrainCorp for AWB Ltd., fertilizer and ag retail giant Agrium has instead stepped forward.
The Calgary company on Sunday announced a A$1.24 billion (C$1.16 billion) all-cash bid for AWB worth A$1.50 per share, compared to Sydney-based bulk handler GrainCorp’s A$855 million all-stock offer last month.
Agrium’s offer, sent to AWB’s board Saturday, “represents attractive value and cash certainty for AWB’s shareholders,” the counter-bidder said in a release Sunday.
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An Agrium/AWB deal “would continue Agrium’s strategy of growing its retail business,” Agrium CEO Mike Wilson said in the release.
Among AWB’s assets are merchandise and fertilizer distributor Landmark Rural Services, the biggest such operation in Australia; Hi-Fert, a wholesale fertilizer distribution company already up for sale; Australian Wool Handlers; and New Zealand ag supply company RD1.
Agrium, Wilson said, “sees significant potential to enhance the product and service offerings to the Australian and New Zealand grower, particularly through (Landmark), by utilizing Agrium’s international fertilizer and crop protection sourcing capabilities, while supporting further growth within each division of AWB.”
Melbourne-based AWB, in a separate release Monday, said its still-unconsummated merger agreement with GrainCorp allows it to enter negotiations on Agrium’s proposal “and (AWB) intends to do so.”
However, AWB noted, a deal with Agrium would need foreign investment approvals from Australian regulators.
Both Agrium’s and GrainCorp’s bids would also require AWB shareholder approval, not just for a deal itself but for an amendment to AWB’s constitution, which now blocks any ownership stake larger than 10 per cent.
“Remains on foot”
AWB emphasized that last month’s agreement with GrainCorp “remains on foot” and that the recommendation from AWB’s directors, that its shareholders vote in favour of the GrainCorp deal, also still stands for now.
The GrainCorp offer, which would give AWB shareholders a GrainCorp share for every 5.75 AWB shares, had been expected to go to an AWB shareholder vote in late October.
GrainCorp hasn’t yet made any official comment on Agrium’s offer or whether it would try to top it, although the firm has said previously it believes it’s “important to have a strong, Australian-owned grain company.”
Leaders in Australia’s NSW Farmers’ Association and Victorian Farmers Federation agreed in Tuesday’s Herald Sun newspaper, voicing their opposition to the idea of a foreign firm taking over a company set up to serve Australia’s farmers.
AWB’s market strength in Australia’s grain sector has eroded significantly since it lost its wheat export monopoly powers in 2008, following a scandal over kickback payments to secure sales to Iraq during Saddam Hussein’s regime.
Viterra, which entered the Australian grain business last year with a C$1.4 billion takeover of ABB Grain, was touted recently by industry observers in the Australian Financial Review as a possible 11th-hour suitor for AWB.
But the Prairie grain handler replied to AFR that it remains an “interested observer” of the GrainCorp/AWB courtship, and that its focus has been “entirely” on its integration with ABB.
Agrium has also been on a major acquisition track in recent years, buying U.S. ag retail firm UAP in 2008. In March it conceded defeat in a year-long courtship of Chicago-based fertilizer player CF Industries.
