Australian grain group, ABB Grain is in play with Canada’s largest grain handler, Viterra, making an approach to buy the local company for around $A1.6 billion.
Nothing definite has been agreed to as of last night.
The offer, the statement from ABB was one of those ‘non-binding’ types that allow talks to start without a binding offer or figure mentioned.
It was the way Kirin of Japan approached Lion Nathan last week before wrapping up the bid on Monday.
ABB shares jumped 20.4% to end at $8.43, after hitting a high of $8.50.
It was a cautionary note from traders who want to see how far the offers go, or if they flush anyone else out, such as AWB of Melbourne or Graincorp in Sydney.
Both are too small but to be targets for the Canadian group, should it fail to pick up ABB.
The shares in AWB rose 19 cents, or 14.41% to $1.51 and Graincorp shares rose 7.5% to $7.59, a rise of 53 cents.
Both AWB and GNC might be forced to look to one another is the approach to ABB succeeds.
"ABB advises that it has received a conditional and non-binding proposal from Viterra to acquire all of the shares in ABB via a scheme of arrangement. ABB confirms that the proposal falls within the reported range of $9.00 to $9.50 per ABB share and comprises a mix of cash, Viterra shares and franked dividends.
"ABB and Viterra are engaged in discussions which may or may not lead to a binding agreement.
"There is no assurance that agreement will be reached or that a transaction will take place at all or within the reported range. The proposal is subject to a number of conditions," ABB reported to the ASX.
Viterra wants ABB, to get hold of grain supplies from Australia, which is the world’s second biggest barley supplier and the 4th largest wheat shipper (when conditions are not drought ridden).
ABB is Australia’s largest barley exporter, having been formed out of the old Australian Barley Board. It’s based in Adelaide where South Australia is the country’s major growing state and exporter.
ABB Grain’s said in February that its annual profit could rise on the back of expanding its business in the Ukraine, New Zealand and locally to reduce its reliance on the Australian grain harvest.
ABB has 111 inland storage terminals in Australia as well as seven export ports and its Joe White Maltings division controls about 9% of the global market for the beer-making ingredient.
ABB also has a range of rural services include fertilizer and agricultural chemical supply, wool and livestock activities.
Viterra is the old Saskatchewan Wheat Pool Inc. It has 253 retail grain facilities across Western Canada and grain handling accounted for 63% of sales in its last financial year (Source).
The website said:
"Viterra Inc. is Canada’s leading agribusiness, with extensive operations and distribution capabilities across Western Canada, and with operations in the United States, Japan, Singapore and Geneva.
"The Company is diversified into sales and services of crop inputs and equipment, grain handling and marketing, livestock feed, agri-food processing and financial products.
"These operations are complemented by value-added businesses and strategic alliances, which allow Viterra to leverage its pivotal position between Prairie farmers and destination customers".
It has sales of around $4 billion a year.
ABB Grain ended talks with AWB, about a possible merger in December after failing to agree on terms. That would have created the nation’s biggest grain exporter after industry deregulation ended the AWB’s old monopoly.
AWB management and shareholders must be kicking themselves now.
Bloomberg said Viterra had previously bought Winnipeg, Manitoba-based rival Agricore United in 2007.
The company is also Canada’s largest exporter of canola seed, while Australia is also a major exporter of canola.
