UPDATE: AWB Limited looks set to be taken over by Canadian fertiliser company Agrium Inc. by the end of the year.
Agrium has completed its due diligence into AWB since it lodged its bid last Monday and has entered into a deed of agreement to buy the Australian company.
- AWB's Canadian suitor
That deed details a formal offer by Agrium to buy all AWB shares for $1.50 a share, in line with its announcement on Monday.
It also allows for AWB to pay its shareholders a fully franked dividend of up to 20 cents a share before the takeover is executed, but any dividend would be subtracted from the $1.50 share price offer.
The dividend payment would be subject to obtaining a favourable ruling from the Australian Taxation Officer and would be paid for by a loan from Agrium.
Under an existing deed of agreement with GrainCorp announced on July 30, AWB must give the bulk handler three days’ notice of any changes.GrainCorp has until next Monday to make a counter bid but sources have said it would not do so.
The AWB board is expected to consider both proposals next Monday night before notifying the Australian Securities Exchange on Tuesday morning it will recommend the Agrium deal to shareholders.
In a press statement, Agrium said it expected the AWB board to agree to its takeover offer.
"AWB has advised Agrium that its board considers the Agrium proposal superior to the proposed merger with GrainCorp Limited," the company said.
Unless another offer comes from left field, Agrium is expected to take over AWB.
Agrium president and chief executive officer Mike Wilson said the takeover provided "significant strategic and financial benefits to a wide array of stakeholders".
"We are particularly excited about the future of working with AWB employees to reinvest in the business and bring a greater choice of products and services to AWB’s grower customer base," Mr Wilson said.
The Agrium offer amounts to a purchase price of $1.237 billion – about 50 per cent higher than GrainCorp’s offer.
Industry analysts did not expect GrainCorp to match the Agrium bid as it was still bedding down its takeover of United Malt Holdings, putting a strain on its financial resources.
A scheme of arrangement must be approved by AWB shareholders and the Supreme Court of Australia.
The meeting of AWB shareholders would also consider the removal of the shareholding cap preventing any single shareholder owning more than 10 per cent of the grain marketer’s share capital.
Once the takeover is executed, all existing AWB directors are required to resign from the board.
Agrium has the right to appoint its own nominees to the AWB board.
