Glencore CEO Ivan Glasenberg is broadcast on a screen during a tele-conference in Hong Kong May 12, 2011. Swiss trader Glencore International AG on Thursday set the price range for the Hong Kong portion of its $11 billion initial public offering, with Glasenberg betting on continue commodities demand in Asia to support the company. REUTERS/Bobby Yip (CHINA - Tags: BUSINESS)BOBBY YIP/Reuters
Glencore International PLC is in advanced talks with two Canadian companies to launch a joint bid for Viterra Inc. , the Toronto-listed grain trader now at the centre of a takeover battle.
The London-listed commodities trading house is preparing a bid with Agrium Inc. , a fertilizer producer, and Richardson International, a privately owned grain trader. A formal offer is expected as soon as early next week, industry executives said.
New York-listed grain traders Archer-Daniels-Midland Co. and Bunge Ltd. are also planning to bid for Viterra, industry executives said. However, Cargill Inc., the world's biggest food commodities trader, does not plan to bid. ADM is seen as the top rival to Glencore, executives said.
Swiss-based Glencore's attempt to expand in agriculture comes as Ivan Glasenberg, chief executive officer, is trying to merge his trading house with Xstrata PLC, the London-listed miner, to create a $90-billion (U.S.) natural resources champion.
Viterra said on Thursday it had started a formal sale process, providing potential bidders wanting to carry out due diligence with access to its financial information. The company said it was aware of speculation of interest at $16 (Canadian) a share, although it said "there can be no assurance that a transaction will occur" or at what price.
Viterra shares jumped 9 per cent after the announcement to $16.07, valuing it at more than $5.5-billion (U.S.). The shares have risen more than 45 per cent since the grain trader disclosed on Friday it had been approached.
The price tag would remain a challenge for the bidders because leading shareholders are asking for $15 (Canadian) to $19. Amit Wadhwaney, at Third Avenue Management, the third-largest shareholder in Viterra, said a deal would be only possible in the "high teens."
The interest on Viterra comes as the lucrative Canadian grain market, one of the largest globally, opens to private sector competition for the first time since the Second World War.
The end of the monopoly of the Canadian Wheat Board is set to boost the profitability of the commercial traders. The CWB, with sales of $5.1-billion (U.S.) in 2010, has had exclusivity in the marketing of wheat and barley from the prairie provinces of western Canada since 1942. But the ruling Conservative government introduced legislation late last year to end the monopoly by August.
Glencore is planning with its partners to split Viterra into three parts, with the trading house taking the grain business, Agrium buying the retail fertilizer business and Richardson taking over the food processing business.
Mr. Glasenberg met investors in the U.S. and made no secret of his desire to bulk up Glencore's business in asset-heavy agriculture trading in North America. However, people who met Mr. Glasenberg in New York suggested that Glencore had limited interest in retail assets.
Glencore would also be likely to sell Viterra's stake in the Medicine Hat fertilizer complex, the people added, with its partner CF Industries seen as a likely buyer for the stake. Viterra owns 34 per cent of Canadian Fertilizers Ltd., which built the Medicine Hat plant in the 1970s, while CF Industries holds 66 per cent.
Glencore, Viterra, Bunge, ADM and Cargill declined to comment. Agrium and Richardson did not immediately return calls seeking comment.