Saskatchewan Wheat Pool Inc.

Saskatchewan Wheat Pool Inc.

March 29, 2007 15:31 ET

Pool Launches a Public Offering of Subscription Receipts and Increases Its Offer and Cash Component for Agricore

REGINA, SASKATCHEWAN--(CCNMatthews - March 29, 2007) -


Saskatchewan Wheat Pool Inc. (TSX:SWP) (the "Pool") is pleased to announce that it has materially increased its offer for Agricore United ("Agricore") and has launched a public market bought deal of subscription receipts totaling $275 million to provide additional funding to support its revised offer for Agricore limited common voting shares.

Under the revised common share offer, which includes proceeds from its previous subscription receipts offerings, each Agricore shareholder will receive $8.00 in cash and 0.95 Pool common shares for each Agricore common share held. The Pool's offer is now, on a comparable basis, worth approximately $4.00 more per limited voting common share than the James Richardson International Ltd. ("JRI") offer of February 21, 2007, as described below:


--------------- ---------------
Pool Proposal JRI Proposal
--------------- ---------------
Total Consideration(2) $17.86 $13.79
Cash Consideration $8.00 $6.50

Public Float(3) approx. $2,000 million approx. $400 million

Control in Market Yes No

Leverage 2.4x 3.1x

Incremental Tax Shelter(4) $172 million "nominal"

Superior Assets(5)
Metric Tonnes ("mt") Handled 7.9 million 4.5 million
Elevator Capacity 1,131,000 mt 576,000 mt
Capacity/Elevator 26,900 mt 12,800 mt
100 Car Spot Elevators 20 14

(1) Presentation based on JRI/OTPP investor presentations dated February
2007 and February 21, 2007. The February 2007 presentation, at the date
hereof, is available on JRI's website, whereas the February 21, 2007
presentation was previously available on JRI's website. Refer to the
Appendix at the end of release for additional detail. The trading price
of the Pool's common shares at approximately 2:45 p.m. on March 29, 2007
was $8.56. No assurance can be made as to the future trading prices of
Pool common shares.
(2) Total Consideration based on JRI's valuation methodology of its
(3) Public float defined as the portion of outstanding shares in the hands
of public investors, excluding directors and controlling-interest
(4) Pool non-capital loss carry-forwards as at July 31, 2006.
(5) Based on each parties individual assets not reflecting remedies required
by Competition Bureau.

The new subscription receipts will be issued on substantially the same terms as those previously issued, subject to the expiration date being May 31, 2007. The Pool will seek, and is confident that it will obtain, an extension of the expiry date on the previous receipt offering to the same date.

"We are extremely pleased that the public market continues to be supportive of a Pool-Agricore combination and we look forward to presenting the merits of our new proposal to the Agricore Board," said President and Chief Executive Officer Mayo Schmidt. "Our bid clearly provides the best value for all shareholders. The strategic expansion brings two historic companies together to create growth and new opportunities for the long-term sustainability of the industry. It is the best combination and a winning solution for Canadian agriculture."

In addition to substantially improving the cash component of the Pool's offer, the company cited a number of reasons why the Pool's offer is superior to the recently announced proposal by JRI and the Ontario Teachers' Pension Plan ("OTPP"). Readers should refer to the Appendix to this release for additional information. A summary of these reasons include:

- The Pool's revised offer eliminates the uncertainty relating to the Canadian Competition Bureau as approval has already been received. The Pool has signed a consent agreement with the Canadian Competition Bureau, satisfying an important condition of its offer and achieving a significant milestone in its efforts to merge with Agricore.

- To meet its obligations under the consent agreement, the Pool and Cargill Limited ("Cargill") have agreed to certain asset transfers. Shareholders and farm customers can now look forward with certainty knowing that a strong and vibrant competitive landscape will remain to support the future success of the agricultural industry.

- The Pool now expects to achieve synergies of $80 million by combining the two western Canadian agri-businesses, which is $20 million more than its previous estimate and approximately 30% higher than the expected savings announced with respect to the JRI proposal.

- The Pool has completed the rationalization of its Prairie infrastructure and brings larger storage capacities, a lower cost operating model and 35% of the industry's 100-car loading capacity to the new company. Given the Pool's higher concentration of 100 car-loaders relative to JRI, the Pool's average capacity/elevator is 26,900 mt, more than double the average capacity of 12,800 mt for JRI.

- The Pool's proposal would ensure that significant liquidity and price discovery remains for all shareholders, with a public float estimated at approximately $2 billion. In addition, it is expected that the Pool, which is currently a member of the S&P/TSX Index, would form a larger component of the Index.

- The Pool has a proven track record as a public company with tradable securities and a seasoned management team.

- The Pool, through the Western Farm Leadership Council ("WFLC"), offers farmers from across Western Canada the opportunity to participate on the Board of Directors by putting forward four farm leaders for consideration by the Pool's governance committee. WFLC is a fully established producer-led organization funded by the Pool. From a governance perspective, control would remain in the market and the Pool would apply its governance model to the new organization, with representation that reflects the importance of farmers as customers and suppliers to the business, and reflects the economic interests of all public market participants.

- The transaction would also see the combination of the Pool's and Agricore's highly innovative and complementary research and development programs based in Western Canada that offer top performing seed varieties targeted to the specific needs of Prairie producers.

"We have examined the needs of our domestic and international customers, in the context of shareholder expectations, and set in motion a plan that we are confident will allow us to maximize the potential of this industry," added Schmidt. "Our offer to acquire Agricore is the result of the work we have done operationally to improve system efficiencies in our own infrastructure, and create one of the strongest balance sheets in the industry. We have a track record of developing solutions that create opportunities that fit the changing environment of agribusiness."

The Pool has extended its offers for all of the outstanding limited voting common shares and Series A convertible preferred shares of Agricore. The offers, outlined in the Pool's circular dated November 24, 2006, are now open until 5:00 p.m. (Toronto time) on April 19, 2007, unless further extended or withdrawn.

In the coming days, Agricore shareholders will be receiving a Notice of Extension and Variation that reflects the revised terms of the offer. Shareholders are advised to review the information carefully, discuss the offers with their broker or financial advisor and contact Kingsdale Shareholder Services Inc., toll-free at 1-866-301-3454 for information on how to tender their Agricore shares to the offers.

The Pool's subscription receipt offering will be completed on a bought deal basis through Genuity Capital Markets and TD Securities Inc. acting as joint book runners, and including National Bank Financial (the "Underwriters"), at a price of $8.10 per subscription receipt. Each subscription receipt will entitle the holder to receive one common share of the Pool upon the earlier of (i) the date of the first take-up of Agricore's common shares under the Pool's take-over bid and (ii) the date of receipt by the Pool of a final order of a court of competent jurisdiction approving an arrangement involving the Pool, Agricore and the holders of Agricore's common shares under applicable corporate law, pursuant to which, among other things, the Pool will acquire all of the issued and outstanding Agricore common shares. The Pool has also granted the Underwriters an option to purchase up to an additional 5.1 million subscription receipts on the same terms at any time up to 30 days after closing of the offering.

The subscription receipts will be issued to the public pursuant to a short form prospectus to be filed with securities regulatory authorities in each province of Canada and sold to certain qualified purchasers in the United States. Closing of the subscription receipt offering is expected to take place on or about April 19, 2007.

The Pool will also be seeking the written approval of holders of subscription receipts issued on February 15, 2007 to, among other things, extend the deadline from 5:00 p.m. (Toronto time) on April 30, 2007 to 5:00 p.m. (Toronto time) on May 31, 2007, by which time these holders would otherwise be entitled to the return of the offering price of those subscription receipts together with their pro rata share of interest (if any) earned from the date of issue. Holders of these subscription receipts on March 29, 2007 will receive a form of written consent in respect of these matters.

Saskatchewan Wheat Pool Inc. is a publicly traded agribusiness headquartered in Regina, Saskatchewan. Anchored by a Prairie-wide grain handling and agri-products marketing network, the Pool channels Prairie production to end-use markets in North America and around the world. These operations are complemented by value-added businesses and strategic alliances, which allow the Pool to leverage its pivotal position between Prairie farmers and destination customers. The Pool's common shares are listed on the Toronto Stock Exchange under the symbol SWP and its existing subscription receipts are traded under the symbol SWP.R. The new subscription receipts will trade under the symbol SWP.N.

For U.S. Shareholders

The offers are being made for securities of United Grain Growers Limited (also known as Agricore United), a Canadian company, that are listed on the Toronto Stock Exchange. The offers will be subject to disclosure requirements of Canada, which are different from those of the United States. It may be difficult for U.S. shareholders to enforce their rights and any claim they may have arising under the federal securities laws, since the Pool and the majority of its officers and directors reside in Canada. U.S. shareholders may not be able to take action against a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.

Forward Looking Information

This release contains forward looking statements that involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such statements. Important factors that could affect these statements include, without limitation, weather conditions; producer's decisions regarding total planted acreage, crop selection, and utilization levels of farm inputs such as fertilizers and pesticides; Canadian grain export levels; changes in government policy and transportation deregulation; world agricultural commodity prices and markets; changes in competitive forces including pricing pressures; and global political and economic conditions, including grain subsidy actions of the United States and European Union.


Background Information as to

Why the Pool's Bid is Superior to JRI Proposal

The Pool's Offer provides superior value to Agricore Shareholders than JRI's proposal for the following reasons:


The Pool has increased its offer for Agricore's common shares such that each Agricore common shareholder will receive $8.00 in cash and 0.95 Pool common shares per Agricore common share. The Pool's offer is now, on a comparable basis, worth approximately $4.00 more per Agricore common share than the JRI offer based on Agricore's valuation methodology of the JRI proposal.

Not only are common shareholders receiving an additional $4.00 for each Agricore common share, they are also receiving shares of an existing liquid public company with a proven track record.

The following table compares the Pool's transaction to the JRI proposal, applying the same methodology that JRI publicly disclosed and used to value its proposal. A higher pro forma EBITDA multiple was assumed for the Pool's proposal given the Pool's superior liquidity and larger public float, the Pool's historical multiple advantage relative to Agricore, the Pool's lower relative leverage than the JRI proposal and the fact that control resides in the market under the Pool transaction.

(In $million except trading multiple and per share information)

-------------- ----------------
SWP Proposal JRI Proposal(1)
-------------- ----------------
Assumed Trading Multiple 8.5x 7.5x
Enterprise Value(2) 2,804 2,220
Equity Value(3) 2,195 1,489
Implied Value per Share $10.38 $14.32

Value to AU Shareholder
Cash $8.00 $6.50
Shares $9.86 $7.29
------- -------
Total Value per Agricore Share $17.86 $13.79
Premium to JRI Proposal 30%
Net Debt/LTM EBITDA (pre-synergies) 2.4x 3.1x

(1) Presentation based on JRI/OTPP investor presentations dated February
2007 and February 21, 2007. The February 2007 presentation, at the date
hereof, is available on JRI's website, whereas the February 21, 2007
presentation was previously available on JRI's website. The trading
price of the Pool's common shares at approximately 2:45 p.m. on March
29, 2007 was $8.56. No assurance can be made as to the future trading
prices of Pool common shares
(2) Pool Enterprise Value based on pro forma latest twelve months ("LTM")
EBITDA of $330 million (including synergies).
(3) Pool Equity Value based on 211.5 million pro forma shares outstanding,
pro forma net debt of $608 million and includes estimated one-time costs
at closing, redemption of convertible preferred shares, less divestiture
proceeds and excess proceeds raised from subscription receipts offering.
Debt based on period-end long-term debt and average short-term debt.
Agricore debt of $525 million per JRI/OTPP investor presentation.


The Pool's shares are a superior currency to the shares that JRI is offering. Under the JRI offer, only 31 million shares of the combined company would be publicly held, excluding shares held by JRI and OTTP. These two companies would together hold approximately 71% of the new entity, leaving only 29% of the company's shares in the public market.

Under the Pool's offer, the combined company would have approximately 211.5 million publicly held shares with an estimated public float of approximately $2.0 billion.


Under the JRI offer, JRI will retain a 50.5% stake in the new company, thereby removing control from the market. By contrast, under the Pool's offer, control would be in the market, with no institutional shareholder maintaining more than a 20% ownership stake in the combined company. Control would reside in the market, rather than with any one single shareholder.


The Pool now expects to realize synergies of approximately $80 million in its combination with Agricore, 29% more than the JRI proposal, given the Pool's relative degree of overlap with Agricore. In addition, while JRI has nominal tax losses, the Pool has significant tax shelter to contribute to the new entity, which will result in incremental cash flow for the combined company.


The Pool has a superior asset base compared to JRI, which will result in a stronger combined entity. For example, the Pool maintains 96% more storage capacity than JRI. In addition, 20, or 48%, of the Pool's grain elevators are the more efficient 100-car loaders, compared to only 31% for JRI, resulting in significantly higher average capacity/elevator for the Pool. Furthermore, the Pool has superior port assets to those of JRI. Upon completion of the Pool's offer, including its related transaction with Cargill, the Pool will operate 100% of the Cascadia Terminal in Vancouver with annual throughput capacity of 6 mmt, together with Pacific Elevators Limited, which has an annual throughput capacity of 2 mmt. Port terminal capacity under a JRI/Agricore combination is uncertain because the JRI proposal still requires Canadian Competition Bureau review and approval.

The Pool has world-class facilities in both its oat milling and malting business through its 100% ownership of Can-Oat Milling and 42% owned Prairie Malt Limited. Can-Oat is the largest industrial oat miller in the world and operates three oat-milling operations - one in Alberta, one in Saskatchewan and one two-plant operation in Manitoba. The company recently completed a successful $12 million capital expansion project to increase its primary milling capacity to serve increasing demand from destination customers. Prairie Malt is the largest single site malting plant in the world. The Pool has a strategic supply agreement with Prairie Malt and is a joint owner with Cargill Inc. A Pool/Agricore combination would have a more diversified asset base, with the Pool's agri-food business complementing Agricore's focus on feed-based operations.


While the board of the combined JRI/Agricore entity would be comprised of 11 directors elected by shareholders, effective control would rest with the two control blocks held by JRI and OTTP who will have direct nomination and/or approval rights in respect of 9 of the 11 proposed directors, including the appointment of the JRI Chief Executive Officer of the combined company. Under the Pool's offer, shareholders of the combined entity will be entitled to elect all of the directors of the company.

The Pool, through the Western Farm Leadership Council ("WFLC"), offers farmers from across Western Canada the opportunity to participate on the Board of Directors by putting forward four farm leaders for consideration by the Pool's governance committee. WFLC is a producer-led organization funded by the Pool that provides educational and training opportunities to help farmers maximize the value of their operations, while supporting producer innovation and leadership in prairie communities through professional development initiatives.


The Pool's offer expires on April 19, 2007. The Pool can move forward with confidence now that it has resolved all of its major regulatory issues. JRI, on the other hand, has not yet mailed its offer documents and regulatory uncertainty remains as they are still in the discussions with regulatory authorities.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States unless an exemption from such registration is available.

Contact Information

  • Shareholder Contact:
    Kingsdale Shareholder Services Inc.
    Toll-free at 1-866-301-3454
    Media Contact:
    Susan Cline
    Saskatchewan Wheat Pool Inc.
    (306) 569-6948