Questions raised over Viterra bidding war

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Viterra Inc. chief executive officer Mayo Schmidt was co-ordinating an intense bidding war for the grain handling company even as he said on television that Viterra had not received any approaches about a takeover, company documents indicate.

Details of the bidding, involving five companies, are included in a circular Viterra has sent to shareholders in preparation for a meeting on May 29 to vote on a $16.25 all cash offer from Glencore International PLC. According to the circular, the bidding began in early February at $14 a share and at one point Mr. Schmidt tried to solicit a bid from a sixth company without success.

And yet when he appeared on television network BNN on March 9 – just 11 days before the deal was announced – Mr. Schmidt was adamant that Viterra had not been approached about a takeover. "No. No. We haven't been approached," he said. The company did issue a press release within hours of his appearance saying that it had "received expressions of interest from third parties."

Securities and governance experts were divided on the implications of Mr. Schmidt's statement but agree the company did the right thing by quickly correcting the record. That clarification, "doesn't excuse his first misrepresentation but it seems they recognized he made a mistake and tried to fix it as soon as they could," said Gar Emerson, a veteran Bay Street lawyer and governance expert

David Anderson, president of The Anderson Governance Group, a Toronto-based board advisory firm, said it would have been worse if Mr. Schmidt had confirmed discussions were taking place on TV, which would have amounted to selective disclosure. "To spill the beans at that point would have been inappropriate," he said. "You have to manage your way that respects all shareholders."

Mr. Schmidt was not available Monday. "All I can say is it really was an intense period for us," company spokeswoman Holly Gibney said, pointing to the company's quick press release following the TV appearance.

That was good enough for Sandy McIntyre, president and CEO of Sentry Investments, one of the largest holders of Viterra stock. "We don't have an issue with it," he said. "The fact they gave complete disclosure in a reasonable period of time was appropriate."

The circular outlines an extensive auction for the company, which remained tightlipped throughout the process. Viterra did not reveal the identity of the other bidders in the filing other than to describe them as "strategic acquirers."

The circular says bidding began on Feb. 6, when Mr. Schmidt met the chief executive officer of an unnamed company to discuss an all-cash bid of between $14 and $14.50 a share (Viterra's shares traded at around $10.30 at the time). Eventually, six companies, including Glencore, considered offers for Viterra, as Mr. Schmidt actively reached out to potential acquirers. Several sources have indicated that U.S. agriculture giants Archer-Daniels-Midland Co. and Bunge were interested.

The circular shows that Glencore bid $16.25 cash on March 18, and the board gave the bidder a 24-hour exclusivity agreement to finalize a deal. When word of that leaked out, Viterra issued a press release confirming that it had "entered into exclusive negotiations with a potential acquirer". On March 20, Viterra's board approved the final deal with Glencore.