03/15/2012 09:38 EDT | Updated 05/15/2012 05:12 EDT

Viterra establishes process for potential takeover bids from interested parties

CALGARY - Grain handler Viterra Inc. has established the rules to review any potential takeover offers, but warned Thursday it cannot guarantee what price it will fetch, or that there will be any deal at all.

In a statement Thursday, the company acknowledged reports speculating on a potential bid — particularly one on U.S. website dealReporter that said offers would need to be at least $16 per share.

The website also said that U.S. companies Archer Daniels Midland and Bunge Ltd., as well as Hong Kong-based Noble Group Ltd., were kicking Viterra's tires, but Viterra didn't disclose which companies had expressed interest.

"Viterra cautions investors not to rely on these press reports as there can be no assurance that a transaction will occur and that if one does occur, there can be no assurance at what price it will be completed," the firm said.

Meanwhile, the Globe and Mail reported that Switzerland's Glencore was teaming up Calgary-based Agrium Inc. (TSX:AGU) and Winnipeg's Richardson family to launch a bid. Sources told the newspaper such a deal would leave most of Viterra in Canadian hands, allaying possible regulatory concerns about a foreign takeover.

Regulators requested trading in Viterra's shares be halted early Thursday, and the company's stock shot up as soon as it resumed. Viterra stock closed up about 10 per cent at $16.09, making the company worth close to $6 billion.

The stock had traded for about $11 last week before Viterra revealed the takeover interest last Friday.

"It looked like it was going to open at $16, and I don't think the exchange was willing to let that jump on such a gap without any news to back that up," said Jason Zandberg, an analyst with PI Financial in Vancouver.

He said he's not sure whether the dealReporter report is true, "but it definitely sparked the imagination of the markets, anyway."

The potential bids come as the company is poised to benefit from the end of the Canadian Wheat Board's monopoly on the marketing of wheat and barley in Western Canada.

Until recently, Viterra's stock price has not reflected the change, said Zandberg.

"I don't think that investors were properly valuing Viterra post-CWB. But it looks as though others that are in the (agriculture) business are recognizing that value."

It's clear Viterra is in play, and that multiple parties are interested, but other than that, there aren't many hard facts for investors to go on, Zandberg said.

"As an investor, you can take a chance at buying at this price and hoping that the bids come in higher," he said.

"Personally, I think that we are getting into the froth of the valuation for Viterra and we'll know more details in terms of valuation when a formal bid is announced."

The company said last Friday it had received expressions of interest from potential buyers shortly after CEO Mayo Schmidt said in an interview on Business News Network that his company had not been approached.

In the event a takeover offer comes from a foreign company, it's likely Ottawa would require the deal to be of "net benefit" to Canada if it's to be approved under the Investment Canada Act.

It was that provision that ultimately killed Anglo-Australian miner BHP Billiton's hostile US$40-billion takeover bid for Potash Corp. of Saskatchewan (TSX:POT) in 2010.

Saskatchewan Premier Brad Wall led the charge against that deal, and said earlier this week the PotashCorp (TSX:POT) deal failed the net benefit test on all three counts: strategic, fiscal and economic.

Although Viterra does not fit the province's definition of a "strategic" resource, Wall told reporters the provincial revenue and job implications would need to be weighed if there were to be a Viterra takeover.

In a note to clients earlier this week, CIBC World Markets analyst Jacob Bout said potential bidders could be grouped into three categories: grain handlers and grain traders; processors or pension funds and private equity.

A consortium of pension funds may see Viterra as a "pseudo-infrastructure play," he wrote.

"We use the term pseudo-infrastructure as we believe only (western) Canadian grain handling and retail have the stable earnings platform."

Alberta Investment Management Corp. is the company's largest shareholder with a roughly 16 per cent stake or about 60 million shares. AIMCo has so far declined to comment on the Viterra takeover speculation.

AIMCo invests on behalf of 26 pension, endowment and government funds in Alberta, including the Alberta Heritage Savings Trust Fund.

Also Thursday, Viterra announced the acquisition of IPS Logistics' container packing operation in Narrabri, Australia. No purchase price was disclosed.

"The acquisition will complement Viterra's existing grain container operations in southern and eastern Australia," said Dean McQueen, Viterra's executive manager for grain in Australia.

"These additional assets in northern New South Wales will allow Viterra to originate and containerize grain beyond our current footprint."

Viterra has operations across Canada, the United States, Australia, New Zealand and China, as well as a growing international presence elsewhere.