Glencore plans three-way Viterra split, source says

Glencore is planning a three-way carve-up of Canada’s largest grain handler Viterra, an industry source said, to help navigate a politically charged federal review process if it wins a looming bidding war for the company.

The source told Reuters that the commodity trading giant wanted to buy all of Viterra and then sell its retail business to Calgary-based fertilizer producer and ag retail firm Agrium.

Privately-owned Winnipeg-based grain trader Richardson International would take Viterra’s food processing unit in a rare and complex so-called “back-to-back” transaction.

Earlier reports had said Glencore, also bidding for mining group Xstrata, was planning a joint offer with Agrium and Richardson, something that might help the Swiss based trader get round Canadian concerns about a sale to a foreign entity.

As the second-largest Canadian grain handler, Richardson would likely also be interested in some grain elevator and port assets.

Viterra, based in Regina, said Thursday it had established a process for potential buyers, and its stock rose 10 per cent.

Shares have hovered around $16 since Thursday, when Viterra said it was aware of media reports of interest at that price. That would value it at some $5.9 billion.

U.S.-based Bunge and Archer Daniels Midland have also reportedly made approaches to Viterra.

“Aware of issues”

Sensitivity to anti-trust issues will be key to how Glencore, Richardson and Agrium — or other suitors — propose to break down the assets, said a source familiar with the matter.

“Whoever’s going to be involved in this will be aware of issues with the Competition Bureau,” the source said. “Everybody is aware how the bureau views these things.”

The bureau was a key player in the last big farm company takeover in Canada, when Saskatchewan Wheat Pool absorbed Agricore United and became Viterra in 2007.

To satisfy the bureau, SaskPool sold some elevators and port assets to No. 3 player Cargill. It also divested some grain elevators and farm retail stores to Richardson, which had also bid for Agricore.

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