January 31, 2013
What if a company wasn't for sale, but several of its peers were lining up to buy it in secret?
That's how things began early last year, when Viterra Inc. found itself speaking with at least four suitors who had independently approached the company's board with potential offers. Because there was no formal sale or auction process, each original bidder thought its offer was the only one on the table. Viterra, they quickly learned, was being sought by several parties - and the company was happy to exploit the deal tension.
The result was a rapid-fire process that ultimately saw Switzerland-based Glencore International PLC reach a friendly deal to buy the iconic Canadian grain-handling business for $6.1-billion.
Glencore's strategy served both to placate regulators and raise some funds to cover part of the purchase. Prior to approaching Viterra, Glen-core struck "side-car" agreements to divest some Viterra units to Agrium Inc. and Richardson International Ltd. (In a deal reached a few months after the March announcement, CF Industries would also emerge as a buyer for some of the Viterra assets, too.)
Observers salute Glencore's strategy. The side-car deals helped ease political and competition concerns by ensuring that a substantial number of Viterra's assets would remain in Canadian hands.
Viterra's board wasn't just impressed with the size of Glencore's offer. They were also impressed by the certainty of the deal. They were confident that the side-car asset sale strategy would please Canadian regulators. Viterra relied on a tactic of its own to enhance the certainty of the transaction. It insisted the Viterra purchase not be contingent on the closing of those deals.
"For all intents and purposes, we were very clear with them," says Patrice Walch-Watson of Torys LLP, which advised Viterra Inc. "We were dealing with Glencore, the purchaser. Whatever they did with the deals on Agrium and Richardson was up to them. Our deal was not contingent on their deal happening."