Grainnet

Winnipeg, Manitoba -- Agricore United (TSX:AU) and James Richardson International Limited ("JRI") announced Feb. 21 that they have agreed to combine to create Canada's largest grain company and a leading global Canadian agri-business.

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.

"Today marks a significant development in the history of these two companies," says Wayne Drul, Chair of the Agricore United Board of Directors.

"Agricore United's agricultural roots go back to 1906, and JRI is currently celebrating its 150th anniversary. With our combined heritage, expertise and reputation for excellence in this industry, the merger of these two organizations offers an outstanding agri-business solution for shareholders, customers and employees."

"The combined company, Richardson Agricore Limited, will be a true Canadian champion, with a broad mix of businesses across Canada and the scale, management expertise and financial strength to compete globally," said JRI Chairman, Hartley Richardson.

"The combined company will be well-positioned to create significant value for its shareholders and connect its customers to even greater market opportunities than we can today."

"It will carry on the Richardson family's commitment to being a trusted partner to Canada's farming communities. It will also have a governance structure that ensures the direct and ongoing input of producers," he added.

The combination of Agricore United and JRI will create:

- Canada's largest grain company with annual grain shipments in excess of 14 million tonnes, and an established presence in 50 countries.

- A company with diversified earnings from grain handling, crop production services, livestock services, oilseed processing and financial services.

- Combined assets strategically located throughout both western and eastern Canada, as well as in the United States and Japan.

- Significant synergies, currently estimated to be about $62 million per year. The synergies will come from realizing efficiencies in overlapping operations, applying best practices to the combined company's operations and reducing overhead costs. Expected net integration and one-time transaction costs are estimated to be about $31 million.

- A financially strong company with pro forma gross sales of about $5 billion for the trailing twelve months ending January 31, 2007 and pro forma earnings before interest, taxes, depreciation and amortization ("EBITDA") of $226 million for the same period.

Pro forma EBITDA including annualization adjustments and expected synergies is estimated to be $296 million. Pro forma net average debt of the combined company is about $700 million.

- A company with the size and financial strength to take advantage of significant growth opportunities.

"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 the 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."

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 tonnes and planned capacity of 1.2 million tonnes upon completion of a new canola crush plant in Yorkton, Saskatchewan.

The combination of Agricore United and JRI will result in significant benefits for customers.

The new company will be financially strong and will continue to be a dependable provider of innovative and cost-effective services and products to farmers, while enhancing its presence in the global market for Canadian grains and oilseeds.

The combined company will be able to draw upon the resources and experience within each of Agricore United and JRI to deliver greater value to farmers.

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 percent and 20 percent, respectively.

The existing holders of Limited Voting Common Shares of Agricore United will own 29.5 percent of the combined company, in addition to receiving an aggregate of $391 million of cash.

Brian Gibson, OTPP Senior Vice-President, Public Equities, says, "We are delighted to be involved in the creation of Richardson Agricore. We believe the combined company will be well positioned to create long-term value, especially with the input of producers."

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.

For more information, call Lori Robidoux at 204-944-5656, email lrobidoux@agricoreunited.com or Radean Carter at 204-944-2238, email rcarter@agricoreunited.com, both of Agricore United.

See Related Websites/Articles:

• Agricore United
• James Richardson International

more GRAIN NEWS...