March 20, 2012 / 1:32 AM / in 5 years

Viterra in exclusive sale talks with Glencore: source

Viterra Inc CEO Mayo Schmidt speaks during the Reuters Food and Agriculture Summit in Chicago March 16, 2011.John Gress

WINNIPEG, Manitoba/NEW YORK (Reuters) - Commodities giant Glencore (GLEN.L), partnered with Canada's Richardson International Ltd and Agrium Inc (AGU.TO), is close to a deal to buy Viterra Inc VT.TO, Canada's biggest grain handler, a source familiar with the matter told Reuters.

Viterra and Swiss-based commodities trader Glencore are still in talks on price, but a deal could be reached within the next 24 hours at a price above C$16 per share, said the source, who could not speak publicly because discussions are ongoing.

At C$16 a share, Viterra's market value would be about C$5.9 billion ($5.95 billion).

Viterra VT.TO said on Monday it was in exclusive talks with one prospective buyer, but it did not identify the suitor.

"I guess they've picked a winner from the bid process and now they're hammering out the details of the bid," said Jason Zandberg, an analyst at PI Financial Corp, who follows Viterra.

In Viterra, Glencore and its partners would acquire the leading Canadian handler of spring wheat, canola, barley and oats, just as the Canadian Wheat Board's monopoly on Western Canadian wheat and barley is slated to end later this year. Viterra also holds a dominant grain-handling position in South Australia.

A rapidly growing global population and rising middle class in some developing countries are expected to drive demand for grains higher over the long term, making major grain handlers and food processors such as Viterra more important.

Canada is the world's No. 8 grain producer.

Glencore, which is also pursuing a 23 billion pound ($36 billion) takeover of miner Xstrata XTA.L, already markets and produces crops, as well as metals, minerals and oil.

The trading house is one of the leading exporters of grain from Europe, the former Soviet Union and Australia, and has been looking to build its North American agriculture business.

Glencore, Agrium and Richardson officials would not comment.

Both Glencore and Viterra have been linked to a possible sale of U.S. energy and grains trader Gavilon Group. It's unclear how a Glencore takeover of Viterra might affect any interest in Gavilon.

Along with its grain-handling assets, Viterra owns the biggest Canadian network of farm input dealers of seed, chemical and fertilizer, a status Agrium already holds in the United States.

Privately held Richardson, currently Canada's No. 2 grain handler, is believed to be interested in some of Viterra's Canadian grain-handling capacity and food-processing assets, such as mills and a canola-crushing plant.

By including Canadian companies, Glencore would likely soften concerns about a foreign company taking over storied Viterra, which was born in 1924 as a farmer co-operative.

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

A takeover of Viterra would also trigger an antitrust review by the Competition Bureau, which operates at arm's length from the Canadian government.

Zandberg said Viterra's exclusive talks would not preclude another suitor from making public an offer - presumably a hostile one - to sway investors.

It's also possible that there is only one party that is seriously interested, Zandberg said.

Viterra's shares slipped 1.3 percent to C$16.00 when they resumed trading at midday after being halted in Toronto, as it appeared less likely the company would receive several takeover bids, Zandberg said. Trading had been halted pending a Viterra statement.

Viterra said last week it was aware of press reports of interest in buying it at C$16 a share. On Monday, it said talks with its suitor are based on a price consistent with that statement.

Viterra's shares had closed at C$10.98 on March 8, the day before the company revealed it had received expressions of interest, which sent the stock skyrocketing.

The Canadian Wheat Board has held its monopoly on Western Canadian wheat and barley for milling or export for 69 years. The newly opened market will allow grain handlers to buy those crops directly from farmers, adding to their profits.

In fiscal 2011, Viterra had net income of C$265 million on sales of C$11.79 billion.

($1=$0.99 Canadian)

Reporting by Rod Nickel in Winnipeg, Michael Erman in New York, Clara Ferreira-Marques in London and Bangalore equities newsroom; Editing by Peter Galloway

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