Viterra cooks up US$240-million pasta deal

CALGARY -- Viterra Inc. is taking a big step on the path to transcend its roots as a prairie grain handler with its first major foray into food production.

Formerly the Saskatchewan Wheat Pool, Viterra has struck a US$240-million agreement to buy the third-largest dry pasta producer and one of the largest durum-wheat mills in North America.

Viterra said Wednesday it will absorb Dakota Growers Pasta Co., a privately owned company. It will pay $18.28 a share for one class of shares, and 10¢ each for another, the Regina-based company said.

The deal fits well with the company’s vision, conceived when it reinvented itself in 2007, said Robert Winslow, an analyst with Wellington West Capital Markets.

“They’ve said that from day one. More value added, further up the food chain,” he said.

With Viterra becoming more vertically integrated, the move will present many opportunities for synergy in processing and distribution, Mr. Winslow said, adding that the acquisition should add to Viterra’s earnings per share.

The offer is conditional on a simple majority of Dakota Growers’ common stock as its board has already approved the deal. About 29% of Dakota Growers’ shareholders have agreed to tender their shares. The company is based in Carrington, North Dakota.

“I think [the deal is] more than modestly accretive,” Mayo Schmidt, the company’s chief executive, said in the company’s first quarter conference call.

Mr. Schmidt said the deal would enhance the existing food processing investments of Viterra, which is also the world’s largest industrial oat miller.

“It’s right in our wheelhouse,” he said.

Viterra has its Australian grain handling acquisition to thank for its first quarter profit, which rang in at $10.7-million.

The 3¢ per share profit includes three full months of contributions from ABB Grain Ltd. of Australia, which Viterra bought in September 2009. The Regina-based company lost $33-million or 14¢ per share in the same quarter last year.

Viterra’s revenue climbed to $1.8-billion from $1.4-billion, a 29% gain, with ABB in the fold.

“Results from our acquisition of the Australian operations reflect normalized conditions for this business,” Mr. Schmidt said in a statement.

“The North American businesses are operating as expected and we believe that 2010 will be a year of recovery for the Australian business.”

Viterra’s North American grain shipments for the quarter were 3.6 million tonnes, compared to 3.8 million tonnes shipped in the first quarter of 2009.

“Canadian Wheat Board shipments were on par with last year, while open market shipments were lower than the previous year’s quarter due to lower canola shipments resulting from temporary import restrictions into China,” the company said.

In Australia, farmers were reluctant to sell their grain during the harvest period due to low commodity prices, Viterra said.

With files from Reuters

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