ABB Grain and Viterra Announce Agreement to Combine Operations

5/19/2009, 1:34 PM (Source: GlobeNewswire)
ADELAIDE, AUSTRALIA and CALGARY, ALBERTA--(Marketwire - May 19, 2009)
- ABB Grain Ltd. ("ABB") (ASX: ABB) and Viterra Inc. ("Viterra")
(TSX: VT) are pleased to announce they have signed an Implementation
Agreement under which Viterra proposes to acquire all the issued and
outstanding shares in ABB for a mixture of cash and scrip via a
scheme of arrangement, which will be subject to shareholder and court

The transaction, valued at approximately A$1.6 billion (C$1.4
billion(1)), is comprised of a combination of cash and shares,
including a special dividend to be paid by ABB.

- The value range is A$9.11 - A$9.41(1) per share (which includes a
special cash dividend of A$0.41 per share to be paid by ABB); and

- The value range increases up to A$9.29 - A$9.59(1) per share for
certain classes of shareholders who benefit from franking on the
special cash dividend(2).

The ABB Directors unanimously recommend that ABB shareholders vote in
favour of the proposed scheme of arrangement, in the absence of a
superior proposal and subject to an independent expert concluding
that the proposal is in the best interests of ABB shareholders. The
transaction has also been unanimously approved by the Board of
Directors of Viterra.

Summary of the Proposed Terms

ABB shareholders will be offered a Default Alternative consisting of
cash and Viterra shares and, subject to the available cash and scrip
pools described below, will have the ability to elect to increase the
amount of cash they receive or increase the number of Viterra shares
they receive. In addition, ABB intends to pay a fully franked special
cash dividend of A$0.41 per ABB share.

ABB shareholders will have the ability to choose between the
following alternatives:

- Default Alternative: A$9.26 per ABB share, consisting of A$4.35 in
cash and 0.4531 Viterra shares (A$4.50(3)) plus the A$0.41 special
dividend; or

- Maximum Cash Alternative: A$9.11 per ABB share, consisting of
A$8.70 in cash plus the A$0.41 special dividend;

-- Maximum Cash elections will be scaled down (to minimum cash of
A$6.53 and maximum scrip of 0.2266 Viterra shares (A$2.25(3)) if ABB
shareholders in aggregate request more cash than the available cash
pool of approximately A$1,128mm (up to circa 75% of the consideration
payable by Viterra); or

- Maximum Scrip Alternative of A$9.41 per ABB share, consisting of
0.9062 Viterra shares (A$9.00(1)) per ABB share plus the A$0.41
special dividend;

-- Maximum Scrip elections will be scaled down (to minimum scrip of
0.4531(3) Viterra shares and maximum cash of A$4.35) if ABB
shareholders in aggregate request more scrip than the available scrip
pool of approximately 78million Viterra shares (up to circa 50% of
the consideration payable by Viterra).

Including the franking benefits attached to the special cash dividend
payment from ABB, there will be further value for certain classes of
shareholders of up to A$0.18(4) per share taking the proposed
transaction value up to A$9.29 - A$9.59(3) per share.

The scrip component will be in the form of CHESS Depository Interests
("CDI") to be listed on the Australian Securities Exchange (the CDIs
will represent an equal interest in Viterra shares and will be
exchangeable into TSX-listed Viterra shares on a one for one basis).
Shareholders can also elect to have their scrip issued as Viterra
shares listed on the Toronto Stock Exchange ("TSX").

Cash Out Facility: To the extent the maximum cash pool is drawn, ABB
shareholders who have elected to take the Maximum Cash Alternative,
will have the ability to have any Viterra shares that they would have
otherwise received, aggregated and sold on their behalf. Shareholders
would receive their pro-rata net cash proceeds from the sale (free of
brokerage costs for small shareholders), net of any applicable taxes.

ABB shareholders will also receive a fully franked interim cash 2009
dividend of A$0.10 with a record date of 16 June 2009 to be paid in
the usual course of business on 30 June 2009.

Implied Premium Analysis

The valuation range of A$9.11 - A$9.41(3) (which includes a special
dividend of A$0.41 to be paid by ABB) per ABB share represents a
premium of:

- 30 - 34% to the ABB closing price of A$7.00 on 27 April 2009 (the
day prior to the announcement that ABB and Viterra were in

- 47 - 51% to ABB's 1 month Volume Weighted Average Price ("VWAP") in
the 1 month up to and including 27 April 2009;

- 55 - 60% to ABB's 3 month VWAP in the 3 months up to and including
27 April 2009.

The Default Alternative (including the special dividend) values ABB
at A$1.61 billion on an equity basis and A$2.09 billion on an
enterprise value basis.(5)

Deal Based on Solid Relationship and Understanding

Commenting on the transaction, Mayo Schmidt, President and CEO of
Viterra said;

"Over a considerable period of time our respective companies have
developed a solid understanding of each others operations, management
philosophies and strategic goals. This relationship has culminated
into a transformational combination that will drive significant value
for all shareholders, destination customers and growers. We are
creating a leading global food ingredients supplier at a time when
markets are expanding. 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. We will be financially
stronger and better able to access capital and manage risks required
to succeed in the global marketplace."

Until now, ABB and Viterra have focused primarily on marketing grains
from their respective countries. Demand for core commodities is
forecast to increase by 20% over the next ten years, with much of the
new demand coming from Asia. Dual origin capabilities from Australia
and Canada are expected to represent a significant competitive
advantage in serving this growing demand.

Michael Iwaniw, Managing Director of ABB, commented;

"The transaction is consistent with our respectively companies'
strategy to expand our global footprint through geographic
diversification and investments in value-added processing. The
transaction will diversify the new company's earnings profile,
offering counter seasonal cash flows and a more even distribution of

Each of the directors of ABB intends to vote their shares in favour
of the transaction in respect of ABB shares they own or control in
the absence of a superior proposal and subject to an independent
expert concluding that the proposal is in the best interests of ABB
shareholders. Following completion of the transaction, four ABB
current directors are expected to join Viterra's expanded Board of
Directors, including a member as the Deputy Chairman.

The transaction is expected to result in a number of benefits for the
combined business, including the following:

- Gateway to Asia: Provides greater exposure to the higher growth
Asian import market, which is becoming increasingly important given
its current trend of growing demand

- Largest Export Origination Capability for Core Commodities: Dual
origin capability, with respective countries maintaining a 37% market
share of net exports of wheat, barley and canola

-- Opportunity to take advantage of logistics arbitrage opportunities

- Business and Geographic Diversification: Reduces concentration and
proportionate earnings in any one geography and business segment

-- Also provides a more consistent distribution of earnings
throughout the year

- Increased Scale: Larger, more diverse operations are expected to
enhance position within global markets, both from grain origination
and marketing, as well as the capital markets

-- Conservative capital structure retains flexibility to continue to
pursue further growth opportunities

- Synergies: Expected synergies of A$30 million per annum

-- Combination of reciprocal best practice efficiencies, as well as
leveraging international scale

-- Synergies expected to be fully realised within three years

The Australian, New Zealand and South East Asian operations of the
new company will be based in Adelaide, which will be the worldwide
headquarters of its malt business. As such, Adelaide will become a
centre of excellence for barley marketing and barley research and
development. The new company is also committed to grower education
and training and will commit significant resources to improve farm
business management skills, marketing expertise, and best practices
among Australian growers, just as it has in the Western Canadian

Perry Gunner, ABB's Chairman, added;

"Australian growers and farmers in Canada can be assured that the
combined company will remain firmly committed to marketing their
respective crops. In fact, our Boards are confident that the
combination will give the company more market presence, access to new
markets and more opportunities to achieve premium prices for growers.
We are bringing together two strong, well managed and strategically
positioned businesses. The proposed combination de-risks the delivery
of ABB's business strategy, creating a more diversified business and
geographic earnings spread."

Implementation Agreement

ABB has entered into an Implementation Agreement with Viterra under
which ABB has agreed to propose a scheme of arrangement for the
acquisition of its shares by Viterra. A copy of the Implementation
Agreement dated 19 May 2009 accompanies this announcement as a
separate document.

The transaction is subject to satisfaction of a number of customary
closing conditions, including the receipt of required regulatory
approvals and court approvals, as well as the approval of ABB
shareholders. Regulatory approvals include approval by the Australian
Foreign Investment Review Board, the New Zealand Overseas Investment
Office and TSX (and ASX) in respect of the issue of new shares (and
CDIs) under the scheme by Viterra.

The Implementation Agreement contains certain terms usual for a
transaction of this nature including no shop and no talk provisions,
mutual break fees, as well as providing Viterra the right to match a
competing proposal.

Next Steps

In due course, ABB's shareholders will receive a scheme booklet that
will contain full details of the proposed scheme, including the basis
for the ABB Board's recommendation that ABB's shareholders approve
the proposed scheme (in the absence of a superior proposal and
subject to the opinion of the Independent Expert). ABB will shortly
appoint an Independent Expert to prepare a report on whether the
proposed scheme is in the best interests of ABB's shareholders. The
Independent Expert's report will be included in the scheme booklet.

It is currently anticipated that ABB will lodge the scheme booklet
with ASIC in due course, and that the scheme meeting is expected to
be held in September 2009.

Genuity Capital Markets and Macquarie Capital Advisers are acting as
financial advisers to Viterra and Torys LLP and Freehills as its
legal advisers.

J.P. Morgan is acting as ABB's exclusive financial adviser and
Johnson Winter & Slattery as legal adviser.

(1) Based on the closing share price of CAD$8.84 per Viterra share on
15 May 2009 (the last trading day in Viterra shares prior to this
announcement) and an Australian Dollar:Canadian Dollar exchange rate
of 0.8901.

(2) The ability of shareholders to use the franking credits will be
subject to certain holding period rules.

(3) Based on the closing share price of CAD$8.84 per Viterra share on
15 May 2009 (the last trading day in Viterra shares prior to this
announcement) and an Australian Dollar:Canadian Dollar exchange rate
of 0.8901.

(4) The ability of shareholders to use the franking credits will be
subject to certain holding period rules.

(5) Based on shares outstanding of 172.8mm and reported average net
debt 2H08 and 1H09 of A$483.1 million.

About Viterra

Viterra Inc. is Canada's leading agribusiness, with extensive
operations and distribution capabilities across Western Canada, and
with operations in the United States, Japan, Singapore and Geneva.
The Company is diversified into sales and services of crop inputs and
equipment, grain handling and marketing, livestock feed, agri-food
processing and financial products. These operations are complemented
by value-added businesses and strategic alliances, which allow
Viterra to leverage its pivotal position between Prairie farmers and
destination customers. The Company's common shares are listed on the
TSX under the symbol VT.

About ABB

ABB Grain Ltd. is a leading Australian agribusiness with a
multi-faceted operation and international focus. ABB's diversified
operations stretch across the entire supply chain. The company's core
business divisions include national supply chain, grain marketing,
malt and rural services. ABB employs 1100 staff across its divisions
throughout Australia and its international operations.

Forward-Looking Information

This release contains forward looking statements that involve certain
risks and uncertainties concerning the parties' ability to close the
transaction and the expected closing date of the transaction, the
anticipated benefits and synergies of the proposed transaction,
anticipated future combined operations, products and services. Actual
events or results may differ materially from those described in this
release due to a number of risks and uncertainties. Important factors
that could affect these forward looking statements include, without
limitation, the outcome of regulatory reviews of the proposed
transaction; the satisfaction of closing conditions, including
obtaining the required regulatory and ABB shareholder approvals;
difficulties that could be encountered in integrating the companies
and that some of the anticipated benefits of the proposed transaction
may not be realized on the schedule contemplated or at all; weather
conditions; producer's decisions regarding total planted acreage,
crop selection, and utilization levels of farm inputs such as
fertilizers and pesticides; grain export levels; changes in
government policy and transportation deregulation; world agricultural
commodity prices and markets; changes in competitive forces including
pricing pressures; global political and economic conditions,
including financial market conditions, fluctuations in currency
exchange rates and grain subsidy actions of the United States and
European Union.

Media Contact:
Viterra Inc.
Susan Cline
(306) 569-6948

Media Contact:
ABB Grain Ltd.
Marc Cooney
+61 8 8385 8055

Genuity Capital Markets
Jamie Nagy
+1 416 687 5261

J.P. Morgan
Aaron Kenavan
+61 2 9220 3004

Macquarie Capital Advisers
Rob Rorrison
+61 2 9635 9314

This announcement was originally distributed by Hugin. The issuer is
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