Sask. Wheat Pool, Agricore agree on new takeover deal

The battle for Agricore United could be headed to an end as Saskatchewan Wheat Pool on Wednesday boosted its offer for the company and agreed to sell some assets to bidding rival James Richardson International Ltd.

Regina-based Saskatchewan Wheat Pool said Agricore of Winnipeg has accepted a new, sweetened offer of $20.50 per common share, all in cash. The Wheat Pool will also pay $24 in cash for each Agricore preferred share.

The value of the takeover, including assumed debt, is now $1.8 billion.

The pool's latest offer, which Agricore has officially accepted, tops an all-cash offer of $19.25 a share made April 19 by James Richardson, another Winnipeg-based grain company. James Richardson has agreed to waive its right to match the Wheat Pool's latest offer.

As part of Wednesday's offer, Wheat Pool said it will sell some Agricore grainelevators and agri-products retail operations for about $255 million, plus amounts for inventories and closing adjustments worth another estimated $60 million. James Richardson will acquire elevators in Manitoba, Saskatchewan and Alberta.

"It's a great outcome;it fully values the company in our view," Wheat Pool president and CEO Mayo Schmidt said in an interview with CBC News.

"It meets James Richardson's needs in terms of the assets they were looking for. It substantially meets our needs in terms of the assets we're looking for."

New name not decided

The Wheat Pool has also agreed to sign a 10-year terminal handling agreement to handle up to 750,000 tonnes of products from privately held James Richardson annually.

Schmidt said a decision hasn't been madeon what to call the merged company. As well, there was no word from Schmidt on where the company would have its head office.

Asked about the possibility of job losses, he said there "will be adjustments to both companies."

Saskatchewan Wheat Pool is Canada's second-largest grain company. Agricore, which has major holdings in Alberta and Manitoba, is about twice the size of the Wheat Pool. Agricore was formed when Agricore Co-operative merged with United Grain Growers in 2001.

Schmidt said the combined company would have annual sales of about $4 billion and a market capitalization of about $2 billion.

The Wheat Pool offer is contingent on 75 per cent of Agricore's shares being tendered by their owners.

Wheat Pool shares up

Although James Richardson entered into the competition as a friendly bidder, the fact remains that the Wheat Pool had a better offer, said Brian Hayward, CEO of Agricore United.

"It really boils down to the fact that $19.25 is less than $20.50," he said in an interview.

Richardson's vice president, Jean Marc Ruest, said his company is happy with the deal, too, thanks to the assets it's picking up. The company also receives a $35 million termination fee from Agricore.

"We now find ourselves in a situation where we've grown our business by approximately 60 per cent," he said. "We've done so at a fair price. And we are able to continue on with our original long-term strategy of being able to diversify into other areas of business."

University of Saskatchewaneconomist Murray Fulton said thatwith this move, the Wheat Pool has achieved a major consolidation of the grain industry.

"We're seeing the Canadian system becoming much, much more like what we see south of the border," he said. "I think that's what the Pool's probably looking at."

Fulton said this bodes well for the grain companies, but not so much for farmers, who will see less competition for their grain.

Wheat Pool shares were up74 cents at $9.36 at the close of the TSX on Wednesday. Agricore was up 28 cents at $20.34.