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Ottawa signals openness to foreign bid for Viterra

Non-Canadian bid would face government review

Canada has signaled it would be open to allowing a foreign bidder such as Swiss-based Glencore to take over Viterra, sending shares of the country's largest grain handler sharply higher for a second session in a row Monday.

Glencore is one of a handful of parties eyeing a bid for Viterra, a Swiss-based industry source said on Monday. But Canada's sometimes protectionist sentiments about natural resources have left some doubting a foreign takeover bid for Viterra would get a smooth ride.

On Monday Viterra's shares jumped more than six per cent, following Friday's 24 per cent rise, after Saskatchewan media quoted that province's Premier Brad Wall as saying he did not consider Viterra a "strategic resource."

While much of Viterra's Canadian management works out of the company's Calgary office, the bulk of its head office staff are based in Saskatchewan's capital, Regina.

Wall's comments suggested a deal by Glencore or another foreign bidder wouldn't face the same level of opposition as a failed 2010 approach for Saskatoon-based PotashCorp.

Viterra, with a market value of around $5 billion, became a hot takeover property with the federal government passing a law late last year that will soon end the decades-old monopoly held by the Canadian Wheat Board over marketing of Prairie wheat and barley.

Taking control of Viterra would give Glencore access to Canada's prized canola, spring wheat, oats and durum wheat supplies. Canada is the world's leading exporter of each crop, and Glencore, the world's largest diversified commodities trader, has been looking to build out its agricultural arm.

"This is a very, very unique asset, it's publicly held and has lots of elements that are not replicable," Greg Pearlman, head of BMO Capital Markets' food and consumer group, said at the Reuters Global Food and Agriculture Summit in Chicago.

"Welcome"

In the Canadian government's first public comments on a Viterra possible deal, Industry Minister Christian Paradis signaled openness.

"Foreign investments help Canadian companies to grow and innovate and provide new opportunities to connect our firms to the world," Paradis said in the House of Commons. "Our government will continue to welcome investment that benefits Canada."

Wall, whose opposition in 2010 to a takeover of PotashCorp helped convince Ottawa to block BHP's bid, said he did not consider Viterra of strategic importance.

"This doesn't fit our own definition of a strategic resource," he told reporters in Regina.

If there were a foreign bid, Wall said, his government would do an "aggressive" study of whether the takeover would benefit Saskatchewan, and make a recommendation to Ottawa. The study would consider a takeover's impact on the provincial economy and finances, he said.

Any foreign takeover of a Canadian company with an asset value of $330 million or more is subject to a federal government review to determine whether it is of "net benefit" to the country.

Because of Viterra's size, a takeover would also face a review by the federal Competition Bureau, although monopoly concerns would likely be more acute if domestic players Cargill or Richardson International were to bid. Viterra owns nearly half of the grain-handling capacity in Western Canada.

Viterra said Friday it had received expressions of interest from unnamed third parties for a possible takeover, sending its shares up sharply.

Glencore, which is also pursuing a 23 billion-pound (C$35.7 billion) takeover of miner Xstrata, already markets and produces crops, as well as metals, minerals and oil.

Paying

Glencore would have little trouble paying for Viterra, BMO's Pearlman said. Minneapolis-based Cargill -- already Canada's third-largest grain handler -- along with U.S firms Archer Daniels Midland and Bunge, Wilmar International and Mitsui in Asia, and Louis Dreyfus in France also have ample means, he said.

Even though Cargill and ADM are cutting costs following weaker quarters, Pearlman said he doubts such conditions would dissuade any company from making a strategic buy such as Viterra.

BMO analyst Joel Jackson said Calgary-based Agrium, the largest North American agricultural products retailer, may emerge as a suitor. Viterra's farm-supply assets might make a neat addition to Agrium's own retail network, he said.

Jackson said he would expect Agrium to bid only for Viterra's agri-products business or sell off the grain handling side if it acquired the entire company.

-- Additional reporting for Reuters by Clara Ferreira-Marques, Victoria Howley and Nigel Hunt in London, Randall Palmer in Ottawa and Euan Rocha in Toronto.


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