Viterra May Buy ABB Grain for Up to A$1.6 Billion

By Rebecca Keenan

April 28 (Bloomberg) -- Viterra Inc., Canada’s largest grain handler, is in talks to buy Australia’s ABB Grain Ltd. for as much as A$1.6 billion ($1.1 billion) to add supply from the world’s second-largest barley exporter and No. 4 wheat shipper.

Viterra offered between A$9 and A$9.50 a share in a non- binding bid that includes cash, stock and dividends, Adelaide- based ABB Grain said today in a statement. The offer is as much as 36 percent more than its closing price yesterday. ABB Grain today jumped 20 percent to a five-month high.

Viterra is considering acquisitions in Australia, Europe and the U.S., Mayo Schmidt, the chief executive officer of the Regina, Saskatchewan-based company, said in January. Australia abandoned its monopoly wheat and barley export systems in the past two years, creating opportunities for international companies to ship grain from the nation.

The offer shows “the keenness by which international traders want to establish Southern Hemisphere” bases, Grant Saligari, research analyst at Credit Suisse Group AG, said by phone from Sydney. “It is a low point in the cycle and it’s a reasonably low point in equity markets.”

ABB Grain, Australia’s largest barley exporter, closed at A$8.43 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Viterra closed down 1.8 percent on the Toronto stock exchange yesterday.

Viterra’s proposal follows Kirin Holdings Co.’s A$3.5 billion offer yesterday for the shares it doesn’t already own in Australia’s second-biggest brewer, signaling some renewal in appetite for mergers and acquisitions after the global recession slowed takeovers. Aluminum Corp. of China is seeking approval for a $19.5 billion investment in Rio Tinto Group.

Boost for Rivals

Rival grain exporters rose on speculation of further consolidation in the industry, Saligari said. AWB Ltd. climbed 14 percent to A$1.51 and Graincorp Ltd. gained 7.5 percent to A$7.59.

Agricultural companies worldwide are seeking acquisitions on optimism the global recession won’t curtail rising food demand. Cargill Inc., the second-largest U.S. beef processor, said last November it’s looking for acquisitions after the collapse in raw material and share prices reduced valuations.

“There is no assurance that agreement will be reached or that a transaction will take place at all or within the reported range,” ABB said in the statement. “The proposal is subject to a number of conditions.”

JPMorgan, Macquarie

ABB Grain appointed JPMorgan Chase & Co. as its adviser. Viterra named Macquarie Capital Advisers Ltd. and Genuity Capital Markets, Viterra spokeswoman Colleen Vancha said by e- mail.

ABB Grain’s annual profit may rise, the company said in February, after expanding its business in the Ukraine, New Zealand and locally to reduce its reliance on the Australian grain harvest. ABB has 111 inland storage terminals in Australia as well as seven export ports, according to its Web site.

Its Joe White Maltings division controls about 9 percent of the global market for the beer-making ingredient. ABB Grain’s range of rural services include fertilizer and agricultural chemical supply, wool and livestock activities.

Viterra, which has investments in animal feed and barley processing, raised C$441.1 million ($362 million) last May to fund acquisitions which may cost between C$500 million and C$2 billion, CEO Schmidt said at the time.

The company operates 253 retail facilities across Western Canada and grain handling accounted for 63 percent of its sales in its last financial year. It posted its first loss in five quarters in March after writing down the value of its fertilizer inventory as prices fell amid the global economic slowdown.

Talks End

ABB Grain ended talks with AWB Ltd., Australia’s former monopoly wheat exporter, about a possible merger in December after failing to agree on terms. The combination would have created the nation’s biggest grain exporter after industry deregulation.

Viterra has previously expanded through acquisitions, acquiring Winnipeg, Manitoba-based rival Agricore United in 2007. The C$1.76 billion deal increased Viterra’s share of Canadian grain handling. The company is also Canada’s largest exporter of canola seed. Viterra officially changed its name from Saskatchewan Wheat Pool Inc. in March 2008.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net