Viterra looks to expand Down Under

Viterra has confirmed that it is in discussions regarding a “possible strategic transaction” with South Australia’s ABB Grain Ltd.

ABB Grain stores, handles and markets grain across Australia. The company’s website says that its malting division, Joe White Maltings, is one of the world’s largest producers of malt with the capacity to produce 500,000 tonnes per year. Other services include fertilizer and ag chem supply and wool and livestock activities.

Australian news reports say Viterra has offered ABB a mix of cash, Viterra shares and “franked dividends” within a range of A$9.00-$9.50 a share.

The companies were in talks, but there was no assurance a binding agreement would be reached “or that a transaction will take place at all or within the reported range,” ABB Grain said in a statement.

A Viterra statement said “No transaction has been agreed to at this time, the current discussions are non-binding and no assurance can be given that any agreement on a transaction will be reached.”

Quoted in the Australian publication The Age, Fat Prophets chief executive Angus Geddes said the Australian grains industry was due for consolidation. “The Canadians have put the whole thing into play,” he said. However, Mr Geddes said $9.50 a share would not be anywhere near enough. ABB was trading at $8.50 to $9 before the financial crisis.

The Australian grain industry has been in flux over the past year following after removal of AWB Ltd.’s monopoly on wheat exports. A rush by competing exporters to do export business has put pressure on the grain handling and transportation system, leading to congestion and shipment delays in recent months.

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