Glencore’s Viterra takeover wins federal government blessing

Glencore’s Viterra takeover wins federal government blessing

Commodity giant Glencore’s “commitments to Canada” and Canadian farmers in its proposed takeover of the country’s biggest grain handler have earned the federal government’s formal approval of the deal.

Federal Industry Minister Christian Paradis on Sunday announced he has approved Glencore International’s application under the Investment Canada Act for its friendly takeover of Viterra, which until now was expected to wrap up by the end of this month.

Paradis said he approves such applications “if I am satisfied that the investment is likely to be of net benefit to Canada” based on the investor’s proposed plans and undertakings. Glencore, he said, “has made a number of commitments to Canada.”

Thus, Paradis said, his approval of the deal “demonstrates that our investment policies are working.”

Paradis’ statement on Sunday — which came after he got a 30-day extension on his decision deadline last month — made no mention of any other conditions Glencore would have to meet beyond those it’s already proposed.

Glencore, in a separate release Sunday, reiterated the commitments it’s making to Canada for “a five-year period,” including a boost in Viterra’s projected capital expenditures in Canada by over $100 million over five years, and another $8 million above Viterra’s projected expenditures in research and development.

Switzerland’s Glencore has also pledged to work with the Saskatchewan government toward setting up a Global Institute for Food Security in the province, and to help support such an institute if the province goes ahead with it. Glencore also pledged a contribution toward “grain industry initiatives” in Manitoba.

Glencore also reiterated it will maintain the Viterra head office in Regina, repatriate a number of head-office jobs to Regina that Viterra had previously shuffled to Calgary, and make Regina the head office for Glencore’s North American ag operations.

The buyer also said it will boost its contributions toward programs supporting Western Canada’s “farm community” by 25 per cent, make charitable contributions supporting youth, and set up educational scholarships for First Nations and Metis.

Paradis’ approval “recognizes the long-term benefits for farmers and Canada from our acquisition of Viterra,” Chris Mahoney, Glencore’s director of agricultural products, said Sunday.

“In due course”

While Paradis’ approval of the deal is a major milestone in the takeover process, other nations’ clearances are still required before the deal can be sealed, including those under Australia’s Foreign Acquisitions and Takeovers Act and China’s Anti-Monopoly Law.

Glencore said Sunday it has also now received notice from China’s Ministry of Commerce (MOFCOM) that it has moved to its next phase of review in the Viterra takeover. The staged process “is not uncommon for transactions being reviewed by MOFCOM,” Glencore said.

However, the notice makes it clear MOFCOM is expected to continue its review into August, which scuttles Glencore’s previous expectation that the Viterra deal would be sealed before the end of this month.

Glencore said Sunday it “will update the market in due course when it expects closing of the Viterra transaction to occur.”

Approvals granted so far include those of Viterra’s shareholders and the Ontario Superior Court of Justice as per the Canada Business Corporations Act, as well as notices from Canadian, U.S., European Commission and Australian antitrust officials that they won’t oppose the deal.

No approvals have yet been confirmed from the Canadian government or Competition Bureau for two side deals announced in March in tandem with Glencore’s proposal for the Viterra takeover.

Canadian agribusinesses Agrium and Richardson International plan to buy a number of Viterra’s ag retail, grain handling and processing assets from Glencore for $1.8 billion and $800 million respectively.

A successful conclusion to those two deals, however, is not a condition of Glencore’s takeover agreement with Viterra.

Glencore last week also announced it would seek approval from holders of Viterra’s senior notes for “certain proposed amendments” that will, among other things, change Viterra’s jurisdiction of incorporation to the state of Victoria in Australia.

Those amendments would “facilitate the integration of Viterra following its acquisition by Glencore and… allow the integrated company greater flexibility in operations,” Glencore said in a July 9 notice.

Related stories:
Farmers ‘likely to benefit’ in Viterra carve-up: Sask. study, May 11, 2012
Glencore/Viterra marriage clears regulators, May 5, 2012
Glencore confirmed as Viterra’s six billion dollar suitor, March 20, 2012

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