Winnipeg, Manitoba
February 21, 2007
Agricore United
(TSX:AU) and James Richardson
International Limited (“JRI”) announced today that they have
agreed to combine to create Canada's largest grain company and a
leading global Canadian agri-business. Under the proposal,
Agricore United shareholders will receive $6.50 in cash and
0.509 shares of the combined company for each Limited Voting
Common Share. Holders of Series A convertible preferred shares
of Agricore United will receive $24.00 in cash per share. The
Board of Directors of Agricore United will recommend that
shareholders accept the offer from JRI.
“Today marks a significant
development in the history of these two companies,” says Wayne
Drul, Chair of the
Agricore United Board of Directors. “Agricore United’s
agricultural roots go back to 1906, and JRI is currently
celebrating its 150th anniversary. With our combined heritage,
expertise and reputation for excellence in this
industry, the merger of these two organizations offers an
outstanding agri-business solution for shareholders,
customers and employees.”
“The combined company, Richardson
Agricore Limited, will be a true Canadian champion, with a broad
mix of
businesses across Canada and the scale, management expertise and
financial strength to compete globally,” said JRI Chairman,
Hartley Richardson. “The combined company will be
well-positioned to create significant value for its shareholders
and connect its customers to even greater market opportunities
than we can today. It will carry on the Richardson family’s
commitment to being a trusted partner to Canada’s farming
communities. It will also have a governance structure that
ensures the direct and ongoing input of producers.”
The combination of Agricore United
and JRI will create:
- Canada's largest grain
company with annual grain shipments in excess of 14 million
tonnes, and an
established presence in 50 countries.
- A company with diversified
earnings from grain handling, crop production services,
livestock services,
oilseed processing and financial services.
- Combined assets
strategically located throughout both western and eastern
Canada, as well as in the
United States and Japan.
- Significant synergies,
currently estimated to be about $62 million per year. The
synergies will come from
realizing efficiencies in overlapping operations, applying
best practices to the combined company’s
operations and reducing overhead costs. Expected net
integration and one-time transaction costs are
estimated to be about $31 million.
- A financially strong
company with pro forma gross sales of about $5 billion for
the trailing twelve months
ending January 31, 2007 and pro forma earnings before
interest, taxes, depreciation and amortization
(“EBITDA”) of $226 million for the same period. Pro forma
EBITDA including annualization adjustments
and expected synergies is estimated to be $296 million. Pro
forma net average debt of the combined
company is about $700 million.
- A company with the size
and financial strength to take advantage of significant
growth opportunities.
“This transaction delivers
significantly greater value to Agricore United shareholders than
the hostile takeover bid
being put forward by Saskatchewan Wheat Pool. Not only does it
provide significantly more cash, but the offer
also poses a lot less risk,” says Jon Grant, Chair of the
Special Committee. “Both parties have mutually determined the
synergies and efficiencies to be gained by the transaction, and
we both have a thorough
understanding of the business plan that will be adopted to
achieve those synergies.”
JRI contributes a number of complementary assets and skills to
the new company. Its largest market for grain
handling and storage is in Saskatchewan and provides a strategic
fit for Agricore United's strong presence in
Alberta and Manitoba, such that the geographic and operational
diversification of the combined business should
ensure it is not overly concentrated in any particular area. In
addition, Canbra Foods Ltd, a subsidiary of JRI, is
Canada’s largest fully integrated canola oil processor with
crush capacity of 420,000 tonnes and planned capacity
of 1.2 million tonnes upon completion of a new canola crush
plant in Yorkton, Saskatchewan.
The combination of Agricore United and JRI will result in
significant benefits for customers. The new company will
be financially strong and will continue to be a dependable
provider of innovative and cost-effective services and
products to farmers, while enhancing its presence in the global
market for Canadian grains and oilseeds. The
combined company will be able to draw upon the resources and
experience within each of Agricore United and JRI to deliver
greater value to farmers.
As part of the transaction, James Richardson & Sons Limited
(“JRSL”), the parent company of JRI, will contribute
$125 million of cash, and Ontario Teachers’ Pension Plan
(“OTPP”) will contribute $266 million of cash to fund the cash
portion of the offer. On completion of the transaction, the
total issued and outstanding shares of the
combined company will be about 103.9 million, with JRSL and OTPP
owning 50.5 percent and 20 percent,
respectively. The existing holders of Limited Voting Common
Shares of Agricore United will own 29.5 percent of
the combined company, in addition to receiving an aggregate of
$391 million of cash.
Brian Gibson, OTPP Senior Vice-President, Public Equities, says,
"We are delighted to be involved in the creation
of Richardson Agricore. We believe the combined company will be
well positioned to create long-term value,
especially with the input of producers.”
The Board of Directors of the new company will be comprised of
11 directors to be elected by the shareholders of
Richardson Agricore. JRSL and OTPP have agreed to support the
election to the Board of Directors of certain
individuals. It is expected that the initial board will include
three nominee representatives of JRSL, two independent directors
initially selected by OTPP and thereafter nominated by the
independent nominating committee and approved by OTPP, two
producer representatives, two additional directors nominated by
JRSL who will be independent under applicable Canadian
securities laws, one independent director nominated by consensus
of JRSL and OTPP, and the CEO of the combined company. The Board
of Directors will be chaired by Hartley Richardson. In the
interim period, Curt Vossen will continue to act as President of
JRI, and Brian Hayward will continue to act as CEO of Agricore
United and both will co-chair a transition committee. Upon
closing of the
transaction, Curt Vossen will assume the role of CEO of
Richardson Agricore.
The Board of Directors of Agricore United, based on the
recommendations of the Special Committee of the Board
of Directors, has determined that the transaction is fair to
Agricore United shareholders and is in the best interests of
Agricore United and will recommend that shareholders accept the
offers from JRI. The company’s financial advisors, Scotia
Capital Inc. and Blair Franklin Capital Partners Inc. have each
provided an opinion to the Board of Directors and the Special
Committee that the consideration under the offer is fair, from a
financial point of view, to Agricore United shareholders. The
Board of Directors continues to recommend that Agricore United
shareholders reject the offers by Saskatchewan Wheat Pool Inc.
(“SaskPool”) to purchase Limited Voting Common Shares and Series
A convertible preferred shares.
The terms of JRI’s offer, including additional information
regarding the synergies, will be contained in JRI’s bid
circular which will be mailed to Agricore United shareholders.
The offer will be subject to certain conditions,
including the tender of at least 75 percent of the outstanding
Limited Voting Common Shares and the receipt of
necessary regulatory clearances.
Pursuant to its pre-existing contractual arrangements with
Agricore United, Archer Daniels Midland Company
(“ADM”), which holds approximately 28 percent of the outstanding
Agricore United shares, is required to tender its shares to a
bona fide takeover bid for all of the Agricore United shares,
and to vote its shares in favour of a bona fide proposed merger,
amalgamation or arrangement proposal that has been recommended
or accepted by Agricore United’s Board of Directors, unless
prior to the expiry of such a takeover bid, or before the date
on which the shareholders of Agricore United approve such a
transaction, ADM makes a proposal to Agricore United that the
Board of Directors of Agricore United has determined is more
favourable than such a takeover bid or
transaction.
Agricore United will call shareholders meetings to approve
the continuance of Agricore United to the
Canada Business Corporations
Act and a plan of
arrangement providing for the acquisition by JRI of the
shares of Agricore United on terms identical to the offer,
to be effected following the expiry of the offer. The
acquisition agreement also includes customary
non-solicitation and fiduciary out provisions, including a
termination fee payable to JRI of $24 million in certain
circumstances, and a right on the part of JRSL and JRI to
match a superior proposal. The transaction is expected to be
completed in mid 2007.
Agricore United shareholders are urged to
read JRI’s bid circular and Agricore United's directors'
circular and proxy circular in detail when such documents
are issued. Such documents will be mailed to Agricore United
shareholders and will be available at
www.sedar.com.
RBC Capital Markets is the financial advisor
to JRI. Scotia Capital Inc. and Blair Franklin Capital
Partners Inc. are financial advisors to the Special
Committee and the Board of Directors of Agricore United.
Additional Information Regarding JRI and
the Transactions
A presentation containing additional
information about JRI and the transaction will be posted on
JRI’s website (www.jri.ca)
following the shareholder and media conference call.
Update on Saskatchewan Wheat Pool Offer
The Agricore United Board of Directors
maintains its unanimous recommendation that shareholders
reject the SaskPool offer and not tender their shares to
that offer. If shareholders have already tendered to the
SaskPool offer, the Board recommends that they withdraw them
immediately. For assistance in doing so, shareholders are
urged to contact Georgeson, toll free within North America
at 1-866-598-9684.
About Agricore United
Agricore United is one of Canada’s
leading agri-businesses with headquarters in Winnipeg,
Manitoba and extensive operations and distribution
capabilities across western Canada, as well as operations in
the United States and Japan. Agricore United uses its
technology, services and logistics expertise to leverage its
network of facilities and connect agricultural customers to
domestic and international customers and suppliers. The
company’s operations are diversified into sales of crop
inputs and services, grain merchandising, livestock
production services and financial services. Agricore
United’s limited voting common shares are traded on the
Toronto Stock Exchange under the symbol “AU”.
About James Richardson International
Limited
JRI, a subsidiary of James Richardson &
Sons, Limited, is the largest privately owned Canadian
agribusiness. It handles all major grains, oilseeds, and
special crops and sells crop inputs and related services
through farm service centres throughout Canada. JRI, which
has 1100 employees, is also actively involved in food
processing through its subsidiary Canbra Foods Ltd. It has a
strong history of growth and profitable operations. James
Richardson & Sons, Limited, established in 1857, is a
privately-owned Canadian corporation. Headquartered in
Winnipeg, the Firm is involved in the international grain
trade, real estate, energy, financial services and
investments.
About Ontario Teachers’ Pension Plan
The Ontario Teachers’ Pension Plan is an
independent corporation responsible for investing the $100
billion fund and administering the pensions of Ontario’s
274,000 active and retired elementary and secondary school
teachers. Approximately 40 percent of the fund is invested
in public equities. As a long-term investor in Canadian
stocks, the Ontario Teachers’ Pension Plan’s public equity
division features a Relationship Investing team, whose
mandate is to manage large-scale strategic investments in
public companies.
Use of Non-GAAP Terms
Earnings before interest, taxes,
depreciation and amortization (EBITDA) are provided to
assist investors in determining the ability of the company
to generate cash flow from operations to cover financial
charges before income and expense items from investing
activities, income taxes and items not considered to be in
the ordinary course of business. The items excluded in the
determination of such measures include items that are
non-cash in nature, income taxes, financing charges or items
not considered to be in the ordinary course of business.
EBITDA provides important management information concerning
business segment performance since the company does not
allocate financing charges or income taxes to these
individual segments. Such measures should not be considered
in isolation to or as a substitute for (i) net income or
loss, as an indicator of the company's operating
performance, or (ii) cash flows from operating, investing
and financing activities as a measure of the company's
liquidity. Such measures do not have any standardized
meanings prescribed by Canadian GAAP and are therefore
unlikely to be comparable to similar measures presented by
other companies. Average net debt is provided to assist
investors and is used by management in assessing the
company’s pro forma liquidity position, and to monitor how
much debt the company has after subtracting liquid assets
such as cash and cash equivalents. Average net debt as at
such dates is calculated by taking the sum of the net debt
(calculated as noted above) as at the end of each relevant
period during the 12 months ended on such date and dividing
by the appropriate factor. Such a measure should not be
considered in isolation of or as a substitute for current
liabilities, short-term debt, or long-term debt as a measure
of the company’s indebtedness |
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