The Saskatchewan Wheat Pool Inc. (SWP), Regina, Sask., has made a formal offer for Agricore United’s outstanding limited voting common shares, Series A convertible preferred shares, and its unsecured subordinated convertible debentures. SWP said the offer would bring the country’s two leading agricultural companies together in an effort to create a strong Canadian agri-business and drive significant new value for shareholders, farm customers, and destination customers.
“Our proposal would give Saskatchewan Wheat Pool and Agricore a stronger and more diversified presence amidst the growing demands of a highly competitive marketplace. We are attempting to create a significant agri-business with decades of expertise, superior assets and a truly unique home grown Canadian advantage. By combining operations we will create the scale and scope of operations to enhance Western Canada’s position in a global environment,” said SWP President and CEO Mayo Schmidt.
SWP said its preliminary analysis is that the combination would form the pre-eminent Canadian agri-business, producing adjusted combined revenues of approximately $4.3 billion and estimated synergies of approximately $60 million, representing 28 percent of pro forma EBITDA for 2006, that would drive both financial and shareholder returns.
SWP said holders of Agricore’s voting common shares would receive, based on trading prices at the close of business on Nov. 7, 2006, a premium of approximately 13 percent of the value of those shares. At these prices, SWP would acquire Agricore on the basis of each outstanding limited voting common share of Agricore being exchanged for 1.35 common shares of SWP, each outstanding $1,000 principal of convertible unsecured subordinated debentures of Agricore (excluding convertible debentures held by U.S. residents) being exchanged for 180 common shares of SWP, and each outstanding Series A convertible preferred share being acquired for $24.00 in cash plus accrued and unpaid dividends.
SWP said it presented an offer to Agricore, Winnipeg, on Oct. 24, and followed Nov. 7 with a second letter in pursuit of a supported transaction.
Agricore said its board of directors will meet to consider the unsolicited proposal and will respond in due course. In the meantime, Agricore said it will not comment on the offers and will not speculate as to any future course of action it might take. Security holders are urged not to tender their securities pending completion of this review and recommendation from the board.
SWP and Agricore, in addition to being involved in the grain business, both sell a large amount of fertilizer and other crop inputs, primarily into the Western Canadian market. SWP estimates the total Western Canadian fertilizer market to be valued at $1.7 billion.
SWP has around 100 retail farm supply outlets, and had agri-product sales of $514.2 million for the fiscal year ending July 31, 2005. Crop nutrient tons sold were estimated at 618,000 mt. SWP has a 43 percent ownership position in Western Co-operative Fertilizers Ltd., which in turn has a 34 percent ownership in Canadian Fertilizer Ltd., a major nitrogen manufacturer in Medicine Hat, Alberta. WCFL is the primary supply source for all fertilizer sold by SWP. Company-wide, net earnings were $12.1 million on sales of $1.4 billion.
Agricore sells crop inputs at 83 elevators and 106 stand-alone centers in Western Canada. Agri-product sales were $815.8 million for the fiscal year ending Oct. 31, 2005. For the year, the company sold 994,000 mt of crop nutrients. Company-wide net earnings were $12.5 million on sales of $2.8 billion.