May 29, 2012 / 5:24 PM / 5 years ago

Shareholders back Glencore takeover of Viterra

The logo of Glencore is seen in front of the company's headquarters in the Swiss town of Zug May 9, 2012.Arnd Wiegmann

CALGARY, Alberta/WINNIPEG, Manitoba (Reuters) - Shareholders of Canada's largest grain handler, Viterra Inc VT.TO, voted overwhelmingly on Tuesday in favor of a friendly takeover bid by Swiss commodities trader Glencore International Plc (GLEN.L), pushing the biggest deal in years for the global agricultural sector closer to reality.

The deal was supported by 99.8 percent of shareholders, far more than the required two-thirds majority.

Glencore offered Viterra C$16.25 per share, or C$6.l billion ($5.9 billion) in March for the company, which owns the biggest share of Western Canada's grain storage and farm supply outlets, as well as nearly all grain storage capacity in South Australia.

The acquisition, which still needs approval by regulators in Canada and Australia, would bring Glencore into the big leagues of agriculture, which are dominated by Archer Daniels Midland Co (ADM.N), Bunge Ltd (BG.N), Cargill Inc CARG.UL and Louis Dreyfus Corp LOUDR.UL, the so-called ABCD quartet of the industry.

In Canada and Australia, where Viterra is strong, "ADM, Bunge and Cargill will take notice of Glencore," said Horst Hueniken, a former analyst based in Toronto who is working to launch a global agricultural hedge fund.

"The other concern will be that Glencore will continue to grow and start penetrating markets beyond Canada, parts of the U.S. and Australia," he said.

Glencore's move comes in one of the busiest merger and acquisition periods for agriculture since the late 1990s as improving diets and incomes in countries like China and India stoke interest in grain companies. Japanese trading house Marubeni Corp (8002.T) on Tuesday swooped in to buy U.S.-based Gavilon Group for $3.6 billion.

The growing use of corn and other crops to make biofuels has tightened supplies of food crops, Hueniken said, making agriculture a likely space for further deal activity.

"The economics are not marginal anymore. It's become a space where merging or acquiring makes sense."

Viterra has been quietly up for auction since late 2011, with approaches made by four bidders, including Glencore, according to public company documents.

On Monday, Russian investment group Summa bought a nearly 50 percent stake in Russian state grain trader United Grain Co (UGC), while Louis Dreyfus is also looking to tap capital markets for the first time.

Canada is the biggest exporter of canola and spring wheat.

Glencore would get most of Viterra's country and port grain storage in Western Canada, some food processing assets, and its grain storage and handling assets in South Australia.

"We look forward to becoming part of the agriculture industry in Western Canada and to contributing to the expansion of the grains and oilseeds sector in those communities now served by Viterra, in Canada, Australia and elsewhere," said Glencore's director of agricultural products, Chris Mahoney.

To win political support in Ottawa, Glencore has cut side deals to sell some of Viterra's assets to two Canadian companies, Agrium Inc (AGU.TO) and Richardson International Ltd.

The end of the Canadian Wheat Board's monopoly over Western Canada's wheat and barley sales is expected to boost profits for grain handlers, who will be able to buy directly from farmers for the next harvest.

NEARLY 100 YEARS

In Viterra, Glencore would get a company with roots nearly a century old in Western Canada's farmer-owned co-operatives.

But there may be little nostalgia left among farmers after years of consolidation resulted in the emergence of Viterra in 2007 as the dominant player in the Western Canada bread basket.

"I think people are quite excited about Glencore," said Stephen Vandervalk, an Alberta farmer and president of the Grain Growers of Canada. "Glencore will now be a smaller player (in Canada) than Viterra was and they bring a world experience and view of things to Western Canada."

Instead, farmers are worried about the increased clout that would be gained by Agrium, the dominant nitrogen fertilizer maker in Western Canada, Vandervalk said.

Agrium would get most of Viterra's retail agri-products business, making it the market leader in Canada, including its 34 percent stake in Canadian Fertilizer Limited, for which it will pay C$1.8 billion.

Richardson will acquire 23 percent of Viterra's grain-handling assets as well as certain processing assets in North America for C$900 million.

Canada's independent Competition Bureau has already said it will not oppose Glencore's takeover of Viterra, but it has not ruled on Glencore's side deals with Agrium and Richardson.

Approval would also be needed from Ottawa, which decides if large foreign takeovers are of net benefit to the country, and from the Australian Competition and Consumer Commission.

Viterra shares were down 1 Canadian cent at C$16.02 in Toronto, suggesting that investors still see some risk that the deal may not be completed.

Glencore shares in London were up 2.4 percent at 351.55 pence, while Agrium stock climbed 2.6 percent to C$81.87 in Toronto, little changed from before the vote result.

The deal is expected to close by the end of July.

Reporting by Scott Haggett in Calgary; Writing by Rod Nickel in Winnipeg; Editing by Leslie Gevirtz, Matthew Lewis, Tim Dobbyn and Steve Orlofsky

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