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China nod clears way for Glencore's Viterra purchase

The logo of commodities trader Glencore is pictured in front of the company's headquarters in the Swiss town of Baar November 20, 2012. REUT
The logo of commodities trader Glencore is pictured in front of the company's headquarters in the Swiss town of Baar November 20, 2012. REUT

By Bhaswati Mukhopadhyay and Rod Nickel

(Reuters) - Glencore International Plc won approval from China's Ministry of Commerce on Friday for its C$6 billion ($6 billion) purchase of Canadian grain handler Viterra Inc, clearing the last regulatory hurdle for the long-delayed deal.

The takeover, one of the largest in the global agriculture industry in years, was originally expected to close by late July.

The deal will give Swiss-based Glencore, the world's largest diversified commodities trader, a huge presence in grains — an area dominated by Archer Daniels Midland Co, Cargill Inc and Bunge Ltd — complementing its strength in metals, minerals and oil.

After selling off some Viterra assets in side deals that still require Canadian regulator approval, Glencore and privately held Richardson International Ltd would be the leading grain handlers in Canada, the world's biggest producer of canola and sixth-largest wheat grower.

Richardson, which has agreed to buy some of Viterra's assets, and Glencore would each own about one-third of Western Canada's grain-handling capacity. The companies would be roughly the same size.

Viterra also owns almost all of the grain storage and handling system in South Australia, which produces about 15 percent of the crops grown in Australia.

Viterra, whose only significant asset in China is a joint venture canola-crushing plant, said on Friday it expects the deal to be finalized on December 17. It was originally expected to close by late July.

There had been speculation that China was holding off on a decision until it found out if the Canadian government would approve a takeover of Canadian oil producer Nexen Inc by China's CNOOC Ltd.

Friday's approval was the last outstanding regulatory nod for the acquisition.

Viterra is one of several major companies in play this year in the global grain-handling sector, with interest driven in part by soaring grain prices and bullish outlooks for a rising world population and food demand.

U.S.-based Archer Daniels Midland raised its bid this week for Australia's GrainCorp Ltd to $2.9 billion, and Marubeni Corp is buying U.S. grain merchant Gavilon for $5.6 billion, pending regulator approval.

Shareholders of Viterra overwhelmingly accepted Glencore's offer of C$16.25 per share in May. Glencore offered to buy Viterra in March.

The extended review has delayed the side deals Glencore has made to transfer some Viterra assets to Agrium Inc, CF Industries Holdings Inc and Richardson.

The Competition Bureau of Canada, which operates at arm's length from the Canadian government, declined to comment on its review of the side deals.

Agrium CEO Mike Wilson said in mid-November that the Canadian fertilizer company expects to close its C$575 million purchase of most of Viterra's farm retail stores in the first quarter of 2013.

Agrium would get 232 Canadian farm retail outlets - where it would sell seed, chemicals and fertilizer to farmers - as well as 17 stores in Australia. Richardson is set to buy 23 percent of Viterra's grain-handling assets, as well as certain processing assets in North America, for C$900 million. U.S.-based CF would acquire Viterra's 34 percent stake in Canadian Fertilizer - a nitrogen plant in Medicine Hat, Alberta - for C$915 million.

Viterra shares, which touched a seven-month low of C$15.65 in late October on concerns over delays to the Glencore deal, rose 2.4 percent in early trading on Friday to C$16.23, just below Glencore's purchase price.

Glencore shares were down 0.8 percent at 343 pence on the London Stock Exchange.

($1 = 0.9894 Canadian dollars)

(Reporting by Bhaswati Mukhopadhyay in Bangalore and Rod Nickel in Winnipeg, Manitoba; Editing by Joyjeet Das and John Wallace)

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