Glencore International plc (Glencore) and Viterra Inc. (Viterra) announced that Glencore is to acquire Viterra for approximately $6.1 billion. Viterra’s portfolio of assets in Canada and Australia will allow Glencore to build upon its position as one of the world’s largest commodity suppliers and provides the opportunity to leverage Glencore’s extensive global networks, expertise and best practices in order to create additional value across its agricultural businesses.
Glencore, headquartered in Baar, Switzerland, is one of the world’s leading integrated producers and marketers of commodities and is listed on the London and Hong Kong Stock Exchanges. Glencore has worldwide activities in the production, sourcing, processing, refining, transporting, storage, financing and supply of Metals and Minerals, Energy Products and Agricultural Products. Glencore produced revenues in excess of US$186 billion in 2011, and net profits in excess of US$4 billion.
Viterra is a leading international agri-business and food ingredients company. Operating three vertically integrated business segments of Agri-products, Grain Handling and Marketing, and Processing, the company adds value and captures margin at numerous points along the food production value chain. With sourcing capabilities in multiple geographies and a marketing network spanning the globe, Viterra supplies food ingredients to more than 50 countries worldwide. In the year ended October 31, 2011, Viterra reported revenues of $11.8 billion and net profits of $265 million.
Chris Mahoney, Director of Agricultural Products of Glencore said, “The acquisition of Viterra reflects our strong belief in the importance and future potential of the Canadian and Australian grain markets. This is an exciting opportunity to deliver the real benefits that can be generated through the combination of Glencore’s and Viterra’s respective assets, people and know-how to both farmers and customers in Canada, Australia and further afield.”
Mayo Schmidt, Viterra’s President and CEO said, “Viterra employees created a world-class agri-business, of which I am very proud. This has been recognized by Glencore and its partners, and this transaction creates value and opportunities for employees, our communities, farmers and customers in all the markets we serve.”
Glencore is confident that the acquisition of Viterra will deliver significant overall benefits to grain farmers. The transaction will give farmers access to Glencore’s global distribution channels and increase their ability to export their product into international grain and oilseeds markets. Glencore’s global reach and expertise will provide farmers with strong protection from market volatility, more options to market their grain and oilseeds and more competitive pricing resulting from Glencore’s wider markets access and its more consistent demand for grains and oilseeds.
Glencore’s logistics network enables it to deliver grain and oilseeds to more regions more efficiently, and its balance sheet strength enables the company to buy greater volumes. This results in a more consistent demand profile and therefore greater pricing continuity for farmers.
As a result of the asset sale agreements Glencore has entered into with Agrium Inc. (Agrium) and Richardson International Limited (Richardson International), Agrium will acquire the majority of Viterra’s retail agri-products business including its 34 per cent interest in Canadian Fertilizer Limited for which Agrium will pay $1.8 billion in cash, subject to specified purchase price adjustments. Richardson International will acquire 23 per cent of Viterra’s Canadian grain-handling assets, certain agri-centers and certain processing assets in North America for $0.8 billion in cash, subject to specified purchase price adjustments.
The transaction is expected to result in the creation of a more robust competitive landscape for Canadian farmers. As appropriate, Glencore also intends to grant third-party access to its handling infrastructure at prevailing market rates.
Commenting on the deal, Mike Wilson, Agrium’s Chief Executive Officer said, “The proposed transaction is an excellent fit with Agrium’s stated strategy of growing across the value chain, allowing us to grow both our Retail and Wholesale operations. We believe that our Crop Production Services Retail business can provide significant value for Canadian farmers and that this opportunity will provide growth in a market where we currently have a limited retail presence.”
Curt Vossen, President of Richardson International, added “Our agreement with Glencore will enhance both our grain handling and processing capacities, and help meet the growing needs of farmers in Western Canada. This expansion of our operations is consistent with our focus on growing our business while nurturing strong relationships with our customers, suppliers and communities.”
Following completion of the acquisition, Glencore will consolidate Viterra’s executive offices in Saskatchewan and make the Regina head office the platform for its North American agricultural operations and for expansion into the United States.
The Board of Directors of Viterra has unanimously approved the transaction and recommends that Viterra shareholders vote in favour of it. The transaction is subject to review under the Investment Canada Act, and by the Competition Bureau. Assuming regulatory approvals are granted, the transaction is expected to close before July 31.
The acquisition of Viterra is not the only deal that Glencore is being occupied by. In February, it announced that it is engaged in talks with Xstrata to effect a merger between the two companies. Glencore already owns 34 per cent of the shares of Xstrata, which is the world’s fourth largest mining company (Xstrata purchased Canadian nickel producer Falconbridge in 2006). A merger between Glencore and Xstrata would create the world’s largest zinc and thermal coal producer, and would also be among the world’s largest producers of copper and nickel. After the merger, Glencore shareholders would own about 60 per cent of the combined company.