September 15, 2010 / 4:22 PM / 9 years ago

UPDATE 1-Agrium mulls future of AWB grain operations

* Viterra may be good fit for grain side-analysts

* Agrium could also look at further ag integration (Adds analysts’ comments, share price)

By Rod Nickel

WINNIPEG, Manitoba, Sept 15 (Reuters) - Agrium Inc AGU.TO AGU.N is considering whether to keep or sell the grain-handling and marketing unit of takeover target AWB Ltd AWB.AX, a top Agrium official said on Wednesday.

Agrium, North America’s leading retailer of fertilizer and chemicals and other farm products, is in the process of buying AWB, Australia’s top bulk wheat exporter, for A$1.2 billion ($1.28 billion).

“(AWB’s) commodity management business — handling, storage and marketing — is something we’re evaluating right now, whether we keep that as part of AWB acquisition, whether we sell it, or whether we partner,” Bruce Waterman, Agrium’s chief financial officer, said at the Credit Suisse Chemical and Ag Science conference in New York.

Agrium’s pending acquisition of AWB for its prized Landmark farm retail outlets has fueled speculation that it may sell the grain-handling side to Viterra Inc VT.TO VTA.AX, the top Canadian grain handler and farm retailer.

Like Calgary, Alberta-based Agrium, Viterra has moved aggressively into Australia, acquiring ABB Grain last year to take control of South Australia’s main grain storage and handling facilities.

“It makes obvious sense logistically for Viterra (to buy the grain side),” said Robert Winslow, an analyst who follows Viterra at Wellington West Capital Markets. “It’s all about price at the end of the day.”

Viterra CEO Mayo Schmidt said last week that he views Agrium’s move into Australia as complementary to Viterra’s operations. [ID:nN08131959]

Agrium, which also mines fertilizer nutrients phosphate, nitrogen and potash, is trying to bolster its farm retail network in Western Canada, a region that Viterra dominates.

“We’re growing quite aggressively there,” Waterman said.

Viterra would likely be interested in AWB’s grain unit, said Raymond Goldie, an analyst who follows Agrium for Salman Partners in Toronto. But there’s also a case for Agrium to diversify from mainly selling farm inputs, he said.

“Agrium is becoming more and more a play on the agricultural industry and they keep increasing their exposure to the retail side,” Goldie said. “It would be a reasonable assumption to say they would want to be integrated all the way from producing fertilizers to selling them to farmers to taking the product of their fertilizer and selling it.”

Agrium shares edged lower on Wednesday on the New York and Toronto stock exchanges.

Waterman also said that an early or on-time U.S. harvest looks likely to leave farmers time to apply fertilizer before winter.

$1=$1.06 Australian Reporting by Rod Nickel; editing by Peter Galloway

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