Glencore Nabs Viterra for $6.2 Billion (VTRAF.PK, GLCNF.PK, AGU)

Canadian grain-handler Viterra Inc. (OTC: VTRAF.PK) has agreed to be acquired by Glencore International plc (OTC: GLCNF) for C$16.25/share, or a total of about C$6.1 billion ($6.2 billion). The all-cash offer will go to vote of Viterra shareholders in May and is expected to close in Viterra’s third fiscal quarter which ends in July.

Under terms of the agreement, Viterra may not seek a better offer, but it may accept one under certain conditions. Viterra has agreed to pay a break-up fee of C$185 million in the event that it does accept a better offer. Glencore will pay a C$50 million break-up fee if the acquisition does not receive regulatory approval.

As part of the deal, Glencore has agreed to sell about C$2.6 billion in assets to Agrium Inc. (NYSE: AGU) and Richardson International:

Glencore has entered into agreements with each of Agrium and Richardson International which provide for the sale of certain assets of Viterra including assets which comprise a majority of Viterra’s existing Canadian operations. The purchase of Viterra is not conditional on Glencore’s agreements with Agrium or Richardson International being completed.

Agrium will acquire the majority of Viterra’s retail agri-products business including its 34% interest in Canadian Fertilizer Limited (“CFL”) for which Agrium will pay C$1.8 billion in cash, subject to specified purchase price adjustments, including payment for working capital.

Richardson International will acquire 23% of Viterra’s Canadian grain handling assets, certain agri-centres and certain processing assets in North America for C$0.8 billion in cash, subject to specified purchase price adjustments, including payment for working capital.

Glencore is also in the midst of merging with Xstrata plc (OTC: XSRAY.PK) in a deal worth about $40 billion. The company noted that the Viterra acquisition is “separate and distinct from the [Xstrata] transaction and will have no impact on the transaction.”

Glencore, already the world’s largest commodity trader, is taking advantage of its recent IPO to consolidate and grow, while non-publicly traded commodity firms like France’s Louis Dreyfus Group and Trafigura, Holland’s Gunvor International B.V., Swiss-based Mercuria Energy Group, and Dutch-Swiss Vitol Group appear to be happy with their current status, although Trafigura was reported to be having difficulty refinancing $3.1 billion due to a US dollar liquidity shortage in Europe. It remains to be seen whether Glencore or its rivals made the better choice.

Paul Ausick