Glencore International PLC and two Canadian partners are close to a deal to buy grain handler Viterra Inc. for about $6-billion, a deal that will bring the Swiss commodity trading giant to Canada and reshape the way prairie farmers buy and sell goods.
Regina-based Viterra had interest from numerous companies, including Archer-Daniels-Midland Co. (ADM) of the U.S. However, Viterra confirmed on Monday that it is in exclusive negotiations with only one suitor. The final bidder left in the running is the Glencore-led group, which plans to carve up Viterra, sources said.
Glencore, based in Baar, Switzerland, has evolved from a small firm founded by onetime fugitive Marc Rich into a global power in commodities trading. To strengthen its business in wheat, Glencore covets the grain-handling assets of Viterra, which was created through the amalgamation of the Prairie provinces' farmer-owned wheat pools. Under the acquisition proposal, most of Viterra's grain elevators that collect wheat from farmers and the port facilities that load the wheat on ships are to end up in Glencore's hands.
Agrium Inc. of Calgary has been lined up to buy most of Viterra's network of retail stores, where farmers purchase goods such as seed and fertilizer. Winnipeg-based Richardson International will take some grain-handling infrastructure, some stores and Viterra's food processing business, which makes items such as pasta and oils.
The final price is likely to be more than $16 a share, said one person familiar with the talks. An announcement may come as soon as Tuesday, said two other people.
The process to sell Viterra unfolded in a huge rush. The company disclosed on March 9 that it had interest from potential bidders, and set up a speedy auction process. As of Friday, ADM was still in the running. But by Monday, the field had been winnowed down to one.
The carve-up of Viterra is designed not only to get each company in the bidding group the assets it wants most, but also to help assuage concerns among politicians in Ottawa and the Prairie provinces who are worried about another large Canadian company disappearing. Most of the Canadian assets would remain Canadian-owned.
For Glencore, the prize is an entrée into the grain-handling business in two of the world's biggest wheat-growing countries. Glencore is a global trader, but it lacks a large presence in North America and in the wheat business. In Viterra, it would gain the largest grain handler in Canada and Australia.
Glencore was founded in 1974 by Marc Rich, a commodities trader who was indicted by the U.S. government for tax evasion, as well as charged with doing illegal oil deals with Iran. He was later pardoned by Bill Clinton just before the end of his presidency.
From that base, the company matured into a company with interests in commodity production around the world, with everything from mines to smelters. The company went public in one of the most heralded IPOs of 2011, listing on the London Stock Exchange. It has a market capitalization of about $46-billion.
Viterra is unlikely to be the only large presence for Glencore in Canada. At the same time as bidding on Viterra, Glencore and chief executive officer Ivan Glasenberg are also trying to take over Xstrata PLC, the mining giant Canadians know because it bought Falconbridge Ltd., giving it extensive holdings in the copper and nickel mining business.
Glencore's IPO made billionaires of Mr. Glasenberg and other senior partners. Forbes lists his net worth at $7.2-billion – more than Viterra's stock market value.
With files from reporter Eric Reguly in Rome