STAT Communications Ag Market News

Agricore Board Approves JRI Merger

WINNIPEG - Feb 21/07 - SNS -- Agricore United's board of directors are recommending shareholders accept a merger proposal from James Richardson International Limited (JRI).

Under the proposal, Agricore United shareholders will receive $6.50 in cash and 0.509 shares of the combined company for each Limited Voting Common Share. Holders of Series A convertible preferred shares of Agricore United will receive $24.00 in cash per share. The Board of Directors of Agricore United will recommend that shareholders accept the offer from JRI.

The companies say the combination will result in the largest grain company in Canada, with an annual grain handling volume of 14 million metric tons (MT) and with combined assets across Canada, and in the United States and Japan.

Gross sales of the combined companies topped CDN $5 billion for the year ending January 31, 2007 and pro forma earnings before interest, taxes, depreciation and amortization was $226 million for the same period. Pro forma net average debt of the combined company is about $700 million.

"This transaction delivers significantly greater value to Agricore United shareholders than the hostile takeover bid being put forward by Saskatchewan Wheat Pool. Not only does it provide significantly more cash, but the offer also poses a lot less risk," says Jon Grant, Chair of Agricore United's Special Committee.

"Both parties have mutually determined the synergies and efficiencies to be gained by the transaction, and we both have a thorough understanding of the business plan that will be adopted to achieve those synergies."

Complimentary Assets

In a press statement, the companies said, "JRI contributes a number of complementary assets and skills to the new company. Its largest market for grain handling and storage is in Saskatchewan and provides a strategic fit for Agricore United's strong presence in Alberta and Manitoba, such that the geographic and operational diversification of the combined business should ensure it is not overly concentrated in any particular area.

"In addition, Canbra Foods Ltd, a subsidiary of JRI, is Canada’s largest fully integrated canola oil processor with crush capacity of 420,000 MT and planned capacity of 1.2 million MT upon completion of a new canola crush plant in Yorkton, Saskatchewan."

As part of the transaction, James Richardson & Sons Limited (JRSL), the parent company of JRI, will contribute $125 million of cash, and Ontario Teachers’ Pension Plan (OTPP) will contribute $266 million of cash to fund the cash portion of the offer. On completion of the transaction, the total issued and outstanding shares of the combined company will be about 103.9 million, with JRSL and OTPP owning 50.5% and 20%, respectively. The existing holders of Limited Voting Common Shares of Agricore United will own 29.5% of the combined company, in addition to receiving an aggregate of $391 million of cash.

The Board of Directors of the new company will be comprised of 11 directors to be elected by the shareholders of Richardson Agricore. JRSL and OTPP have agreed to support the election to the Board of Directors of certain individuals.

It is expected that the initial board will include three nominee representatives of JRSL, two independent directors initially selected by OTPP and thereafter nominated by the independent nominating committee and approved by OTPP, two producer representatives, two additional directors nominated by JRSL who will be independent under applicable Canadian securities laws, one independent director nominated by consensus of JRSL and OTPP, and the CEO of the combined company. The Board of Directors will be chaired by Hartley Richardson.

In the interim period, Curt Vossen will continue to act as President of JRI, and Brian Hayward will continue to act as CEO of Agricore United and both will co-chair a transition committee. Upon closing of the transaction, Curt Vossen will assume the role of CEO of Richardson Agricore.

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