October 5, 2010

Canada close to taking control of the sale of Australia's wheat harvest

Canadians are now close to controlling the sale of the bulk of Australia's annual wheat harvest after the Foreign Investment Review Board backed Agrium's AUD1.24 billion (US$1.19 billion) offer for the Australian Wheat Board (AWB) yesterday.

Agrium, North America's third-biggest supplier of farm fertiliser, was told there were no grounds to block its offer of AUD1.50 (US$1.44) a share. Agrium said the two companies would now focus on seeking the required regulatory, shareholder and court approvals.

Agrium's move on AWB comes on top of the sale of ABB Grain last year to Viterra, another Canadian concern, which now dominates grain handling and marketing in South Australia.

The AWB deal, already recommended by the AWB board, is expected to be signed off by Christmas, mid-point through what is expected to be a bumper harvest of 24 million tonnes.

AWB will handle the biggest share, taking between 25-30% of the crop at a time when wheat is in short supply on global markets.

Short of the takeover offer being voted down at a shareholders' meeting next month, analysts and AWB insiders are confident the deal will go through, having been pitched by Agrium at 50% above AWB's share price when the offer was made in August.

AWB's traditional ownership base, consisting of farmers, had largely sold their scrip in the company to raise cash during the drought and in response to the Iraqi oil-for-wheat scandal. Institutions and retail investors now hold 80% of the stock.

After yesterday's FIRB clearance, shareholders will receive a formal offer document later this month, which will be followed four weeks later by a special shareholders meeting. Under AWB's constitution, any vote to lift a 10% cap on shareholders has to pass by 75%, with 50% of its shareholders taking part in a poll.

AWB shares finished 0.34% higher at AUD1.485 (US$1.42).