AWB a seed of growth for Agrium

Q: How does Agrium say it will manage AWB if the takeover succeeds?

Agrium says AWB will be in safe hands, that it values the AWB brand and plans to keep and build on that history, and that it has no specific plans at this point to break up the company. Agrium also expects due diligence to take less than two weeks.

AGRIUM says a successful takeover of AWB will see the grains marketer in safe hands, with the Calgary-based company to use AWB as a springboard into Asia.

By InvestSMART · 18 Aug 2010

By InvestSMART ·
18 Aug 2010

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AGRIUM says a successful takeover of AWB will see the grains marketer in safe hands, with the Calgary-based company to use AWB as a springboard into Asia. Agrium's $1.2 billion bid for AWB is the latest in a spate of international moves on Australian agricultural assets and comes after Canadian group Viterra acquired ABB Grain last year. Further consolidation is expected, with GrainCorp and Elders believed to be attractive to large international players. Australian Agricultural Company, which owns 1.2 per cent of Australia's land, has 62 per cent foreign owners on its share register, including a 20 per cent stake held by Dubai-based IFFCO. Agrium chief executive Mike Wilson said there was no reason for Australian farmers to fear foreign ownership. "Agrium plans on bringing value to Australia, certainly not destroying it," he said. "We value the history the brand AWB brings to the country and to the farmer, and we're going to continue with that." Mr Wilson rejected speculation that Agrium planned to sell AWB's grains trading business, saying there were "no specific plans at this point" to break up the company. He said due diligence was expected to take less than two weeks. Mr Wilson said Agrium had strengthened its presence in Europe and the Middle East and had eyed an Australian acquisition for "three to five years". AWB presented itself as the perfect entry point into Asia's food bowl, he said. "Australia has great potential to serve as Agrium's regional hub for the Asia-Pacific region and the basis for additional future expansion in the region," Mr Wilson said. Agrium's $1.50-a-share takeover offer has blown GrainCorp's nil-premium merger proposal out of the water and GrainCorp is unlikely to come back with an improved offer. While there were competition concerns over that merger due to an overlap with GrainCorp and AWB's grain storage facilities, Mr Wilson said Agrium's Australian entry would increase competition in grain trading, storage and handling. Wheat prices have eased to less than $US7 a bushel, after reaching a two-year high of $US8.68 earlier this month when Russia said it would suspend exports because of drought. Mr Wilson said he was "fairly bullish" on grain prices due to growing demand. "If you look at wheat in particular and the Russian situation, that's a weather situation," he said. "Is the world going to have a sufficient supply of wheat in the short term? I think so. Is the world needing more wheat in the long term? Absolutely."

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Frequently Asked Questions about this Article…

What is Agrium's takeover offer for AWB and how much is it worth?

Agrium, a Calgary-based company, has launched a takeover bid for AWB valued at about $1.2 billion — equivalent to a $1.50-a-share offer. The bid is presented as a full takeover proposal to acquire AWB.

How does Agrium say it will manage AWB if the takeover succeeds?

Agrium says AWB will be in "safe hands," that it values the AWB brand and plans to keep and build on that history, and that it has no specific plans at this point to break up the company. Agrium also expects due diligence to take less than two weeks.

Why is Agrium targeting AWB — what’s the strategic goal for Agrium in the Asia-Pacific?

Agrium sees AWB as a springboard into Asia, calling Australia a potential regional hub for the Asia‑Pacific. The company expects AWB to provide an entry point into Asia’s food bowl and a basis for future expansion in the region.

Could the Agrium takeover lead to more consolidation in Australian agribusiness?

Yes. The article notes that Agrium’s bid is the latest example of international moves into Australian agricultural assets — after Viterra acquired ABB Grain — and that further consolidation is expected, with companies like GrainCorp and Elders seen as attractive targets for large international players.

Are there competition concerns with deals involving AWB and GrainCorp?

There have been competition concerns because AWB and GrainCorp have overlapping grain storage facilities. Agrium argues its entry would actually increase competition in grain trading, storage and handling, but regulatory scrutiny of overlaps is a potential issue for any merger.

What does the article say about foreign ownership of Australian agricultural companies?

The article highlights that foreign ownership is already significant in some firms — for example, the Australian Agricultural Company reportedly has 62% foreign owners on its register, including a 20% stake held by Dubai‑based IFFCO. Agrium’s CEO has said farmers need not fear foreign ownership and that Agrium plans to bring value to Australia.

How are global grain prices described and what is Agrium’s outlook for wheat prices?

The article notes wheat prices eased to less than US$7 a bushel after earlier peaking at US$8.68 when Russia suspended exports due to drought. Agrium CEO Mike Wilson said he is "fairly bullish" on grain prices because of growing demand — confident short‑term supply should be sufficient but seeing a clear long‑term need for more wheat.

What should everyday investors watch next in the Agrium-AWB takeover story?

Investors should monitor the due diligence timeline (Agrium expected it to take under two weeks), any regulatory or competition reviews, responses from other bidders (the article suggests GrainCorp is unlikely to improve its proposal), and broader signals such as consolidation activity in the sector and movements in global grain prices.