Agrium sells AWB commodity management business to Cargill
Calgary, Alberta, Canada
December 15, 2010
ALL AMOUNTS ARE STATED IN A$ UNLESS OTHERWISE STATED
Agrium Inc. (TSX and NYSE: AGU) today announced that a definitive agreement has been reached with Cargill, Incorporated ("Cargill") pursuant to which Cargill has agreed to acquire a majority of the commodity management businesses of AWB Limited (“AWB”). The purchase price to be paid by Cargill will be the net asset value of the acquired businesses as at the completion date of the transaction plus a premium. The purchase price will be payable in cash and by Cargill assuming AWB's consolidated indebtedness related to the acquired businesses. We anticipate that the sale to Cargill will be completed in the first half of 2011.
If the transaction had occurred and the purchase price had been determined on the basis of the net asset value of the acquired businesses as at September 30, 2010, we estimate that the aggregate of the net proceeds from the sale of the acquired businesses to Cargill, together with the release of working capital from AWB Harvest Finance Ltd., a finance company that supports the ACM business, would have been approximately A$870-million. We are continuing to evaluate the disposition of certain other businesses that form part of the commodity management business that is not being acquired by Cargill. We estimate the value of these additional businesses to be approximately A$55-million which, combined with the estimated net proceeds from the sale of the acquired businesses to Cargill and the release of working capital from Harvest Finance, represents a total estimated value of A$925-million for the commodity management businesses that we have agreed to, or intend to, divest. Of this total, approximately A$240-million would represent indebtedness assumed by Cargill related to the acquired businesses. The Australian dollar is currently on par with the U.S. dollar based on the Bank of Canada noon rate in effect on December 14, 2010.
“We are pleased to have reached an agreement for the sale of AWB’s commodity management business to Cargill, one of the world’s leading grain handlers and traders. Agrium indicated from the outset that we would conduct a thorough review of the commodity business with AWB management, and we believe that this is the best course of action for all stakeholders involved. The combination of AWB’s commodity management business with Cargill will be a significant milestone in the evolution of Australia’s grain industry. We believe it will provide dividends for Australian growers through improved market access, knowledge, relationships, and expertise in the world grain trade and as a result will provide a stronger global marketing presence for Australian crops,” said Agrium’s President and CEO, Mr. Mike Wilson.
“Agrium is committed to ensuring the commodity management divisions operate on a ‘business as usual’ basis in the interim and we will continue to focus on the successful integration of Landmark in a timely and effective manner. Agrium is excited to be in the important Australian agriculture retail market and will strive to realize the full strengths and opportunities that the Landmark business presents for the benefit of the Australian grower,” concluded Mr. Wilson.
We believe that the AWB/Landmark acquisition will be significantly accretive to our earnings in 2011. Landmark generated EBITDA of A$69-million in the fiscal year ended September 30, 2010. Assuming similar performance for 2011, Landmark could generate A$81-million of EBITDA, including synergies of A$17-million and integration costs of A$5-million in the first year. The synergy target for 2012 and beyond is A$40-million or more. We expect to achieve these synergies primarily through a combination of enhanced purchasing efficiencies, expansion in product offerings and a reduction in overhead expenses.
Completion of the disposition to Cargill is subject to customary closing and other conditions, including the receipt of all required regulatory approvals.
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