Adelaide, Australia and Calgary,
Canada
May 19, 2009
ABB Grain Ltd. (“ABB”) and
Viterra Inc. (“Viterra”) are pleased to announce they have
signed an Implementation Agreement under which Viterra proposes
to acquire all the issued and outstanding shares in ABB for a
mixture of cash and scrip via a scheme of arrangement, which
will be subject to shareholder and court approval.
The transaction, valued at approximately A$1.6 billion (C$1.4
billion Based on the closing share price of CAD$8.84 per Viterra
share on 15 May 2009 (the last trading day in Viterra shares
prior to this announcement) and an Australian Dollar:Canadian
Dollar exchange rate of 0.8901.), is comprised of a combination
of cash and shares, including a special dividend to be paid by
ABB.
- The value range is A$9.11
- A$9.41(1) per share (which includes a special cash
dividend of A$0.41 per share to be paid by ABB); and
- The value range increases up to A$9.29 - A$9.59(1) per
share for certain classes of shareholders who benefit from
franking on the special cash dividend(2).
The ABB Directors unanimously
recommend that ABB shareholders vote in favour of the proposed
scheme of arrangement, in the absence of a superior proposal and
subject to an independent expert concluding that the proposal is
in the best interests of ABB shareholders. The transaction has
also been unanimously approved by the Board of Directors of
Viterra.
Summary of the Proposed Terms
ABB shareholders will be offered a Default Alternative
consisting of cash and Viterra shares and, subject to the
available cash and scrip pools described below, will have the
ability to elect to increase the amount of cash they receive or
increase the number of Viterra shares they receive. In addition,
ABB intends to pay a fully franked special cash dividend of
A$0.41 per ABB share.
ABB shareholders will have the ability to choose between the
following alternatives:
- Default Alternative:
A$9.26 per ABB share, consisting of A$4.35 in cash and
0.4531 Viterra shares (A$4.50(3)) plus the A$0.41 special
dividend; or
- Maximum Cash Alternative: A$9.11 per ABB share, consisting
of A$8.70 in cash plus the A$0.41 special dividend;
-- Maximum Cash elections will be scaled down (to minimum
cash of A$6.53 and maximum scrip of 0.2266 Viterra shares
(A$2.25(3)) if ABB shareholders in aggregate request more
cash than the available cash pool of approximately A$1,128mm
(up to circa 75% of the consideration payable by Viterra);
or
- Maximum Scrip Alternative of A$9.41 per ABB share,
consisting of 0.9062 Viterra shares (A$9.00(1)) per ABB
share plus the A$0.41 special dividend;
-- Maximum Scrip elections will be scaled down (to minimum
scrip of 0.4531(3) Viterra shares and maximum cash of
A$4.35) if ABB shareholders in aggregate request more scrip
than the available scrip pool of approximately 78million
Viterra shares (up to circa 50% of the consideration payable
by Viterra).
Including the franking benefits
attached to the special cash dividend payment from ABB, there
will be further value for certain classes of shareholders of up
to A$0.18(4) per share taking the proposed transaction value up
to A$9.29 - A$9.59(3) per share.
The scrip component will be in the form of CHESS Depository
Interests ("CDI") to be listed on the Australian Securities
Exchange (the CDIs will represent an equal interest in Viterra
shares and will be exchangeable into TSX-listed Viterra shares
on a one for one basis). Shareholders can also elect to have
their scrip issued as Viterra shares listed on the Toronto Stock
Exchange ("TSX").
Cash Out Facility: To the extent the maximum cash pool is drawn,
ABB shareholders who have elected to take the Maximum Cash
Alternative, will have the ability to have any Viterra shares
that they would have otherwise received, aggregated and sold on
their behalf. Shareholders would receive their pro-rata net cash
proceeds from the sale (free of brokerage costs for small
shareholders), net of any applicable taxes.
ABB shareholders will also receive a fully franked interim cash
2009 dividend of A$0.10 with a record date of 16 June 2009 to be
paid in the usual course of business on 30 June 2009.
Implied Premium Analysis
The valuation range of A$9.11 - A$9.41(3) (which includes a
special dividend of A$0.41 to be paid by ABB) per ABB share
represents a premium of:
- 30 - 34% to the ABB
closing price of A$7.00 on 27 April 2009 (the day prior to
the announcement that ABB and Viterra were in discussions);
- 47 - 51% to ABB's 1 month
Volume Weighted Average Price ("VWAP") in the 1 month up to
and including 27 April 2009;
- 55 - 60% to ABB's 3 month
VWAP in the 3 months up to and including 27 April 2009.
The Default Alternative (including
the special dividend) values ABB at A$1.61 billion on an equity
basis and A$2.09 billion on an enterprise value basis.(5)
Deal Based on Solid Relationship and Understanding
Commenting on the transaction, Mayo Schmidt, President and CEO
of Viterra said:
"Over a considerable period of time our respective companies
have developed a solid understanding of each others operations,
management philosophies and strategic goals. This relationship
has culminated into a transformational combination that will
drive significant value for all shareholders, destination
customers and growers. We are creating a leading global food
ingredients supplier at a time when markets are expanding. With
assets in the key exporting geographies of Australia and Canada,
the new company will have enhanced access to high growth markets
and margin opportunities. We will be financially stronger and
better able to access capital and manage risks required to
succeed in the global marketplace."
Until now, ABB and Viterra have focused primarily on marketing
grains from their respective countries. Demand for core
commodities is forecast to increase by 20% over the next ten
years, with much of the new demand coming from Asia. Dual origin
capabilities from Australia and Canada are expected to represent
a significant competitive advantage in serving this growing
demand.
Michael Iwaniw, Managing Director of ABB, commented;
"The transaction is consistent with our respectively companies'
strategy to expand our global footprint through geographic
diversification and investments in value-added processing. The
transaction will diversify the new company's earnings profile,
offering counter seasonal cash flows and a more even
distribution of earnings."
Each of the directors of ABB intends to vote their shares in
favour of the transaction in respect of ABB shares they own or
control in the absence of a superior proposal and subject to an
independent expert concluding that the proposal is in the best
interests of ABB shareholders. Following completion of the
transaction, four ABB current directors are expected to join
Viterra's expanded Board of Directors, including a member as the
Deputy Chairman.
The transaction is expected to result in a number of benefits
for the combined business, including the following:
- Gateway to Asia:
Provides greater exposure to the higher growth Asian
import market, which is becoming increasingly important
given its current trend of growing demand
- Largest Export Origination Capability for Core
Commodities: Dual origin capability, with respective
countries maintaining a 37% market share of net exports
of wheat, barley and canola
-- Opportunity to take advantage of logistics arbitrage
opportunities
- Business and Geographic Diversification: Reduces
concentration and proportionate earnings in any one
geography and business segment
-- Also provides a more consistent distribution of
earnings throughout the year
- Increased Scale: Larger, more diverse operations are
expected to enhance position within global markets, both
from grain origination and marketing, as well as the
capital markets
-- Conservative capital structure retains flexibility to
continue to pursue further growth opportunities
- Synergies: Expected synergies of A$30 million per
annum
-- Combination of reciprocal best practice efficiencies,
as well as leveraging international scale
-- Synergies expected to be fully realised within three
years
The Australian, New Zealand and
South East Asian operations of the new company will be based in
Adelaide, which will be the worldwide headquarters of its malt
business. As such, Adelaide will become a centre of excellence
for barley marketing and barley research and development. The
new company is also committed to grower education and training
and will commit significant resources to improve farm business
management skills, marketing expertise, and best practices among
Australian growers, just as it has in the Western Canadian
market.
Perry Gunner, ABB's Chairman, added;
"Australian growers and farmers in Canada can be assured that
the combined company will remain firmly committed to marketing
their respective crops. In fact, our Boards are confident that
the combination will give the company more market presence,
access to new markets and more opportunities to achieve premium
prices for growers. We are bringing together two strong, well
managed and strategically positioned businesses. The proposed
combination de-risks the delivery of ABB's business strategy,
creating a more diversified business and geographic earnings
spread."
Implementation Agreement
ABB has entered into an Implementation Agreement with Viterra
under which ABB has agreed to propose a scheme of arrangement
for the acquisition of its shares by Viterra. A copy of the
Implementation Agreement dated 19 May 2009 accompanies this
announcement as a separate document.
The transaction is subject to satisfaction of a number of
customary closing conditions, including the receipt of required
regulatory approvals and court approvals, as well as the
approval of ABB shareholders. Regulatory approvals include
approval by the Australian Foreign Investment Review Board, the
New Zealand Overseas Investment Office and TSX (and ASX) in
respect of the issue of new shares (and CDIs) under the scheme
by Viterra.
The Implementation Agreement contains certain terms usual for a
transaction of this nature including no shop and no talk
provisions, mutual break fees, as well as providing Viterra the
right to match a competing proposal.
Next Steps
In due course, ABB's shareholders will receive a scheme booklet
that will contain full details of the proposed scheme, including
the basis for the ABB Board's recommendation that ABB's
shareholders approve the proposed scheme (in the absence of a
superior proposal and subject to the opinion of the Independent
Expert). ABB will shortly appoint an Independent Expert to
prepare a report on whether the proposed scheme is in the best
interests of ABB's shareholders. The Independent Expert's report
will be included in the scheme booklet.
It is currently anticipated that ABB will lodge the scheme
booklet with ASIC in due course, and that the scheme meeting is
expected to be held in September 2009.
Genuity Capital Markets and Macquarie Capital Advisers are
acting as financial advisers to Viterra and Torys LLP and
Freehills as its legal advisers.
J.P. Morgan is acting as ABB's exclusive financial adviser and
Johnson Winter & Slattery as legal adviser.
(1) Based on the closing share price of CAD$8.84 per Viterra
share on 15 May 2009 (the last trading day in Viterra shares
prior to this announcement) and an Australian Dollar:Canadian
Dollar exchange rate of 0.8901.
(2) The ability of shareholders to use the franking credits will
be subject to certain holding period rules.
(3) Based on the closing share price of CAD$8.84 per Viterra
share on 15 May 2009 (the last trading day in Viterra shares
prior to this announcement) and an Australian Dollar:Canadian
Dollar exchange rate of 0.8901.
(4) The ability of shareholders to use the franking credits will
be subject to certain holding period rules.
(5) Based on shares outstanding of 172.8mm and reported average
net debt 2H08 and 1H09 of A$483.1 million.
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. The
Company's common shares are listed on the TSX under the symbol
VT.
ABB Grain Ltd. is a leading Australian agribusiness with a
multi-faceted operation and international focus. ABB’s
diversified operations stretch across the entire supply chain.
The company’s core business divisions include
national supply chain, grain marketing, malt and rural services.
ABB employs 1100 staff across its divisions throughout Australia
and its international operations.
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