SaskPool makes bid to acquire rival Agricore
Prairie grain marketer Saskatchewan Wheat Pool Inc. has made an unsolicited offer to take over rival Agricore United Ltd. in a stock swap that would create an agricultural giant with annual revenue of $4.3-billion.
The deal would mark the merger of two companies whose names, SaskPool, and United Grain Growers — Agricore's predecessor firm — have been icons of the prairie landscape.
The combination of the two public companies would create the “pre-eminent agribusiness in Canada” that will have the clout to compete with big multinationals in the grain handling business, SaskPool chief executive officer Mayo Schmidt said on a conference call Tuesday.
It would also help to erase some of the 25-per-cent overcapacity that now exists in the Canadian grain handling business, he said.
Linking the two companies will allow cost saving of about $60-million a year, Mr. Schmidt said, mainly through the elimination of duplication among the two operations.
The combined entity would have a market capitalization of about $1.2-billion.
Agricore's management has yet to officially respond to the offer, Mr. Schmidt said. SaskPool first broached the merger possibility in a letter sent to its rival firm late in October, and Agricore answered by saying it would deal with the issue at its next board meeting. SaskPool didn't want to wait, however, and announced its intentions Tuesday.
An Agricore spokesman said last night that the company has not yet received official word of the offer, but its board “will be reviewing it in due course.”
SaskPool will proceed with its offer to the shareholders, even if Agricore's management or board balks, Mr. Schmidt said.
Regina-based SaskPool is the largest grain handler and marketer in Saskatchewan, while Agricore, based in Winnipeg, operates throughout the Prairie provinces.
The two companies ship grain through ports in Vancouver, Prince Rupert, B.C., and Thunder Bay.
Under the terms of the offer, SaskPool would give 1.35 of its common shares for each common share of Agricore. Agricore debentures would also be exchanged for SaskPool shares, while holders of each Agricore preferred share would get $24 in cash.
SaskPool said the offer represents a 13-per-cent premium for Agricore shareholders. The deal would require SaskPool to issue about 80 million new common shares — worth about $550-million at Tuesday's closing price. After the merger, current Agricore shareholders would own about 47 per cent of the combined company.
Mr. Schmidt said his company has notified the federal Competition Bureau of its intentions, but he doubts the bureau will have a problem with the proposal because there is still a lot of competition in the market. There are six other major grain handlers in Canada — including multinational giants such as Cargill Ltd. — and many small players as well.
“Our goal is to operate the most efficient infrastructure on the Prairies to attract more international market demand ... and we believe the competition bureau will share that view,” he said.
There could be closings of elevators and terminals, he added, but that will depend on discussions with the competition bureau.
Agricore has about 2,800 employees and shipped 9.9 million tonnes of grain in 2005. Created when Agricore Cooperative Ltd. and United Grain Growers Ltd. merged in 2001, it had sales off about $2.8-billion last year.
SaskPool has about 1,500 employees and sales of close to $1.4-billion.
SaskPool stock is widely held, while Agricore has about 23 per cent of its shares held by U.S. agriculture giant Archer-Daniels-Midland Co.
The proposal was announced late Tuesday after the markets closed.
SaskPool stock closed down 6 cents at $6.91, while Agricore shares closed down 5 cents at $8.24.
Prairie grain marketer Saskatchewan Wheat Pool Inc. has made an unsolicited offer to take over rival Agricore United Ltd. in a stock swap that would create an agricultural giant with annual revenue of $4.3-billion.The deal would mark the merger of two companies whose names, SaskPool, and United Grain Growers — Agricore's predecessor firm — have been icons of the prairie landscape.
The combination of the two public companies would create the “pre-eminent agribusiness in Canada” that will have the clout to compete with big multinationals in the grain handling business, SaskPool chief executive officer Mayo Schmidt said on a conference call Tuesday.
It would also help to erase some of the 25-per-cent overcapacity that now exists in the Canadian grain handling business, he said.
Linking the two companies will allow cost saving of about $60-million a year, Mr. Schmidt said, mainly through the elimination of duplication among the two operations.
The combined entity would have a market capitalization of about $1.2-billion.
Agricore's management has yet to officially respond to the offer, Mr. Schmidt said. SaskPool first broached the merger possibility in a letter sent to its rival firm late in October, and Agricore answered by saying it would deal with the issue at its next board meeting. SaskPool didn't want to wait, however, and announced its intentions Tuesday.
An Agricore spokesman said last night that the company has not yet received official word of the offer, but its board “will be reviewing it in due course.”
SaskPool will proceed with its offer to the shareholders, even if Agricore's management or board balks, Mr. Schmidt said.
Regina-based SaskPool is the largest grain handler and marketer in Saskatchewan, while Agricore, based in Winnipeg, operates throughout the Prairie provinces.
The two companies ship grain through ports in Vancouver, Prince Rupert, B.C., and Thunder Bay.
Under the terms of the offer, SaskPool would give 1.35 of its common shares for each common share of Agricore. Agricore debentures would also be exchanged for SaskPool shares, while holders of each Agricore preferred share would get $24 in cash.
SaskPool said the offer represents a 13-per-cent premium for Agricore shareholders. The deal would require SaskPool to issue about 80 million new common shares — worth about $550-million at Tuesday's closing price. After the merger, current Agricore shareholders would own about 47 per cent of the combined company.
Mr. Schmidt said his company has notified the federal Competition Bureau of its intentions, but he doubts the bureau will have a problem with the proposal because there is still a lot of competition in the market. There are six other major grain handlers in Canada — including multinational giants such as Cargill Ltd. — and many small players as well.
“Our goal is to operate the most efficient infrastructure on the Prairies to attract more international market demand ... and we believe the competition bureau will share that view,” he said.
There could be closings of elevators and terminals, he added, but that will depend on discussions with the competition bureau.
Agricore has about 2,800 employees and shipped 9.9 million tonnes of grain in 2005. Created when Agricore Cooperative Ltd. and United Grain Growers Ltd. merged in 2001, it had sales off about $2.8-billion last year.
SaskPool has about 1,500 employees and sales of close to $1.4-billion.
SaskPool stock is widely held, while Agricore has about 23 per cent of its shares held by U.S. agriculture giant Archer-Daniels-Midland Co.
The proposal was announced late Tuesday after the markets closed.
SaskPool stock closed down 6 cents at $6.91, while Agricore shares closed down 5 cents at $8.24.
*By RICHARD BLACKWELL , Globe and Mail Update
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