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Canadian Firm Agrium now targets AWB, outdoing an earlier offer from Graincorp::

In a bid to undermine an already underway deal between Graincorp and AWB, Canadian firm, Agrium, has launched an offer for AWB pegged at about $1.1 billion. Agrium is a Canadian fertiliser manufacturer and its bid threatens to kill the rival bid offered by GrainCorp, a domestic Australian firm.

GrainCorp had earlier reiterated that its move was targeted at expanding its business in its Asian retail operations. AWB is Australia’s biggest wheat exporter and its takeover has generated a clash that reflects the most recent consolidation move in Australia’s grain handling industry. Overseas firms are fighting for a bigger chunk of the country’s market, considered the fourth biggest wheat exporter in the world.

Whereas supplies of wheat in Russia and Europe are struggling with drought and reduced harvests, Australia’s wheat industry is expecting an abundant harvest in 2010. The drought and wild fires that have hit Russia are threatening to push global wheat prices to a two year high this month. Other than the two current firms offing for AWB, industry sources have speculated that major firms such as Viterra from Canada and American commodities company, Gavil Group are also thought to be mulling a possible offer.

AWB lost its firm foothold in Australia’s wheat exports two years ago. With the new offer from Agrium, AWB shares went up by over 30%. Agrium is the biggest agricultural products retailer in North America and has a market capitalization of $10.5 billion. The Canadian firm made an all cash offer for AWB over the weekend and its abrupt offer came as a shocker to the market.

However, analysts believe GrainCorp won’t let off easily and may match or outdo the Agrium bid. Even so, analysts reiterated that GrainCorp’s share price may be indicative of the company’s shareholders sentiment that is against a bid battle. Its share price went up by 6%, marking a nine month high that analysts say indicates a disinterest from GrainCorp shareholders over a bid war. Agruim’s offer marks a 37% premium to AWB’s closing price as at Friday the 13th August 2010 and effectively beats GrainCorp’s earlier bid in July.

Subsequently, the new offer places AWB’s value at A$1.2 billion, while GrainCorp’s offer placed AWB’s value at A$921 million. According to the Canadian firm, its bid is aimed at taking over AWB’s Landmark Rural Services, the company’s grain control arm for which Agrium hopes to use for growing its international fertilizer and crop protection sourcing capabilities.

16 Aug 2010