Viterra shares surge on takeover buzz

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The future of Viterra Inc., one of Canada's largest agriculture companies, has been thrown into question after the company confirmed on Friday that it had received "expressions of interest" for a possible takeover only hours after its chief executive officer said there had not been any offers.

Regina-based Viterra handles nearly half the grain grown in Western Canada, making it by far the largest player in this country. It also controls most of the grain trade in Australia, another major grain exporter.

The confusion surrounding the company's future began Friday morning when Viterra CEO Mayo Schmidt was asked on BNN if the company had been approached about a takeover. "No, no. We haven't been approached," he said.

A few hours later, Viterra issued a press release that said "in view of market activity in Viterra's shares, the company acknowledges it has received expressions of interest from third parties. There can be no assurance that any agreement or transaction will result."

While Viterra's share price on the TSX had been relatively stable over the preceding few days, the volume of shares traded jumped sharply on Thursday to roughly 3.9 million from around 1.6 million in the previous days. Viterra announced on Thursday that its first-quarter earnings had fallen 23 per cent from a year earlier to $78-million, but that was due to lower grain prices and the profit was in line with most analysts' expectations. After the company's announcement Friday, Viterra's share price jumped 24 per cent to $13.58, raising its total value to just over $5-billion. A company spokesman declined to comment on what prompted the press release.

Possible buyers of Viterra are almost certain to be multinational grain companies eager to move into the Canadian market in light of the federal government's decision to strip the Canadian Wheat Board of its monopoly over the sale of wheat and barley grown in Western Canada. Viterra has said the government's move will increase its operating profit by up to $50-million annually, or roughly 7 per cent. "It's a perfect time to be in the Canadian agricultural industry," Mr. Schmidt told reporters this week.

Experts say potential buyers could include U.S. grain trading giant Bunge Ltd., which has some limited operations in Canada, as well as Japan's Mitsui & Co. Ltd. and Swiss commodity trader Glencore International PLC.

Viterra had come under pressure last fall from its largest shareholder, pension fund manager Alberta Investment Management Corp., which called for an overhaul of the company's board. The spat ended with Brian Gibson, a senior vice-president at AIMCo, joining the board in November.

A foreign takeover of Viterra could spark a political debate. Many farmers have opposed the government's decision to end the Wheat Board's monopoly and some have gone to court to try to block the move. They argue the Wheat Board gave farmers clout in international markets which led to better prices and that the government's action was illegal.

Bill Gehl, a Saskatchewan farmer who is leading one of the court actions, said he was not surprised Viterra had received takeover offers. "This has everything to do with the loss of [the Wheat Board]" he said Friday. He added that Canadians should be worried about a potential foreign takeover of Viterra. "I'd be very concerned about somebody ending up with [45 per cent] of the grain-handling capacity in Western Canada and I think everybody should be concerned about that," he said.

Mr. Gehl said the situation was similar to the proposed takeover of Potash Corp. of Saskatchewan by British-based BHP Billiton Ltd., which the federal government stopped.

A spokesperson for federal Agriculture Minister Gerald Ritz said the Minister would not comment on speculation. Mr. Ritz has defended the decision to strip the Wheat Board of its monopoly by arguing famers will have the ability to sell their own grain in much the same way many already do with canola and other crops.

Viterra is the second major grain trader now in play. A group of hedge funds that own U.S.-based Gavilon Group, which was spun off from ConAgra Foods Inc. in 2008, announced in January that they were seeking possible buyers for the company. Viterra had been mentioned as a potential bidder although the company declined comment.