Viterra to take over ABB Grain for $1.6bn

Under the scheme of arrangement, ABB Grain shareholders would receive the equivalent of $9.11 to $9.59 a share in cash, stock and special dividends, the two companies said in a joint statement.

That compares with a previous non-binding offer made by Viterra last month of $9 to $9.50 a share in cash, shares and franked dividends.

ABB Grain shares were $8.60 yesterday.

"The transaction is consistent with our respective companies' strategy to expand our global footprint through geographic diversification and investments in value-added processing," ABB Grain managing director Michael Iwaniw said.

"The transaction will diversify the new company's earnings profile, offering counter seasonal cash flows and a more even distribution of earnings."

ABB's core operations include grain marketing, national supply chain and malt and rual services, while Viterra operations include agri-food processing, livestock feed, grain handling and marketing.

The new company is poised to generate synergies of $30m a year, and these synergies are expected to be fully realised within three years.

Benefits of the merger include logistics abritrage opportunities and increased exposure to the Asian import market,  the  companies said.

Global demand for core commodities is predicted to rise by 20% over the next 10 years, with new demand coming largely from Asia.  

"With assets in the key exporting geographies of Australia and Canada, the new company will have enhanced access to high growth markets and margin opportunities," Viterra chief executive Mayo Schmidt said.

"We will be financially stronger and better able to access capital and manage risks required to suceed in the global marketplace."

The Australian, New Zealand and South East Asian operations of the new company will be based in Adelaide, which will be the global headquarters of its malt operations.

The proposed offer is subject to investor and court approval. The scheme meeting is expected to take place in September.

ABB's financial adviser is J.P. Morgan.