Glencore International Plc (GLEN), the largest publicly traded commodity supplier, and two Canadian agricultural companies are nearing a deal to buy Viterra (VT) Inc., said three people with knowledge of the plan.
Glencore is bidding with Agrium Inc. (AGU) and Richardson International Ltd. for the Regina, Saskatchewan-based grain handler, the people said, asking not to be identified before a formal announcement. A deal may be announced within 24 hours, two of the people said. The Viterra sales process closed march 18 and other parties had expressed an interest, one of the people said.Viterra said yesterday in a statement it’s in exclusive talks with an unnamed third party for a possible acquisition at a price consistent with its March 15 statement that referred to approaches at “approximately C$16 a share.” That would value Viterra at about C$6.86 billion including net debt.
Glencore’s move on Viterra is part of Chief Executive Officer Ivan Glasenberg’s efforts to extend the trader’s geographical reach and expand its agriculture unit. The Baar, Switzerland-based company is also trying to seal a 23 billion- pound ($36.6 billion) friendly takeover of metals and coal producer Xstrata Plc (XTA), which it announced in February.
An agreement may be reached at the lower end of a price range of C$16 to C$19 a share, two people said. Viterra dropped 1.5 percent to C$15.97 in Toronto yesterday and 1.6 percent to A$15.08 at 10:10 a.m. today in Sydney. Glencore advanced 0.5 percent to 420.45 pence in London yesterday.
Viterra “is a very unique asset,” Amit Wadhwaney, a portfolio manager at Third Avenue Management LLC, Viterra’s fourth-largest shareholder, said in a March 15 interview. “To replicate something like that would take years if not decades.”
Viterra has said its earnings and market share will increase after Aug. 1, when wheat and barley farmers in western Canada can sell to buyers other than the Canadian Wheat Board. It owns more than half the grain-export capacity in Canada as well as ports in South Australia, which are key gateways to growing markets in Asia, according to the company.
Tracey Shelton, a spokeswoman for Richardson, Simon Buerk, a spokesman for Glencore, and Todd Coakwell, an Agrium spokesman, declined to comment.
“Viterra confirms that it has begun exclusive negotiations with a party and the basis of this exclusive negotiation is at a price which is consistent with our previous statement,” the company said in the statement yesterday.
A purchase at C$16 a share would value Viterra at about 9.8 times its earnings before interest, taxes, depreciation and amortization in fiscal 2011. That compares with a median of 10.3 times Ebitda for North American food and agriculture takeovers worth at least $1 billion, according to data compiled by Bloomberg. At about 0.5 times sales, it would also be cheaper than the industry’s median revenue multiple of 1.1 times, the data show.
A deal at C$16 a share also would be at a 53 percent premium to Viterra’s 20-day average before the company announced March 15 had received interest from third parties. The average premium in the industry is 31 percent.
Annual earnings before interest, taxes, depreciation and amortization will rise by C$50 million a year after 2014 as Viterra’s market share expands to almost 50 percent from 45 percent, the company forecast March 8.
Grain handling and marketing made up 68 percent of Viterra’s sales in the year through Oct. 31 with agricultural products accounting for 19 percent and food processing at 13 percent, data compiled by Bloomberg show.
Richardson, the second-largest grain handler in Canada, is a unit of Winnipeg-based James Richardson & Sons Ltd. Calgary- based Agrium is North America’s largest fertilizer supplier by revenue.
Glencore is among companies exploring an offer for Omaha, Nebraska-based grain trader Gavilon Group LLC, people familiar with the matter said March 6.