DBRS Comments on Agrium’s Potential Acquisition of Viterra Assets

DBRS notes today that Agrium Inc. (Agrium or the Company) has announced that it has entered into a definitive agreement with Glencore International plc (Glencore) to acquire the majority of the Canadian and Australian retail agricultural product facilities, as well as a minority position in a nitrogen facility located in Medicine Hat, Alberta, currently owned by Viterra Inc. (Viterra), if Glencore is successful in completing its proposed acquisition of Viterra (also announced today). Agrium has agreed to purchase the specified Viterra assets from Glencore for approximately $1.15 billion plus working capital estimated to be approximately $0.5 billion in a back-to-back purchase and sale arrangement. DBRS views Agrium’s potential acquisition of Viterra assets as complimentary to Agrium’s existing businesses and, if completed as proposed, the acquisition is within the Company’s existing financial capacity. Accordingly, DBRS does not expect the acquisition to impact Agrium’s current rating.

Glencore and Viterra today announced that they have signed a definitive agreement pursuant to which Glencore has agreed to acquire all of the issued and outstanding shares of Viterra. Glencore’s acquisition of Viterra, to be done under a plan of arrangement, has received unanimous approval from Viterra’s board of directors but remains subject to the approval of Viterra’s shareholders and is subject to customary closing conditions, including receipt of court, shareholder and regulatory approvals and the absence of material adverse changes. A special meeting of Viterra shareholders is expected to be held in May 2012 to consider Glencore’s acquisition proposal, and the Glencore transaction is expected to close by the end of July 2012.

The acquisition of the Viterra assets is consistent with Agrium’s growth strategy for its existing businesses and is affordable for the Company. Under the agreement with Glencore, Agrium would acquire approximately 90 percent of Viterra's Canadian retail facilities and all of its Australian retail facilities, as well as Viterra’s 34% interest in a nitrogen facility located in Medicine Hat, Alberta. The completion of Agrium’s acquisition of the Viterra assets is subject to the completion of Glencore's acquisition of Viterra and to certain other terms and conditions in the definitive agreement.

Agrium reported solid operating and financial results for 2011, with record net earnings from continuing operations of $1.5 billion. The Company’s cash balances at December 31, 2011, totalled $1.3 billion, and it had approximately $1.9 billion in unutilized short-term credit capacity. Nonetheless, Agrium continues to be acquisitive and has recently approved a $1.5 billion expansion at its Vanscoy potash operations, requiring the Company to be prudent in matching its operating and other cash flows to expenditures in order to maintain its credit metrics, which are currently solid for the Company’s rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Mining Industry, which can be found on our website under Methodologies.