Canada's agribusiness giant Agrium Inc has halted the plans of GrainCorp to become Australia's biggest wheat exporter by yesterday making an A$1.2 billion ($1.1 billion) in cash counter offer for AWB Ltd.

Agrium, a major retail supplier of agricultural products and services in North and South America, submitted a fully financed unsolicited proposal to acquire AWB at A$1.50 per AWB share, representing a 57 per cent premium to AWB closing price of A$0.955 on 29 July 2010.

Agrium's offer is A$345 million more than GrainCorp offer of A$855 million ($770 million) made on 31 July 2010. (See: GrainCorp to buy AWB to become Australia's largest wheat exporter)

Sydney-based GrainCorp had offered to issue one of its own share for every 5.75 AWB shares, a premium of 9 per cent to 28 July 2010 closing price, valuing each share at A$1.047 and the deal at A$855 million.

Agrium said that is in discussions with AWB to see that its proposal would be recommended by the AWB Board to its shareholders.

''The proposed transaction with AWB would continue Agrium's strategy of growing its retail business. Agrium sees significant potential to enhance the product and service offerings to the Australian and New Zealand grower, particularly through AWB's retail Landmark Rural Services division, by utilising Agrium's international fertilizer and crop protection sourcing capabilities, while supporting further growth within each division of AWB,'' said Agrium president and CEO Mike Wilson.

Founded in 1931 as Cominco Fertilizers Ltd, and changed its name to Agrium in 1995,  the Calgary, Alberta-based company is a major retail supplier of agricultural products and services in both North and South America and a leading global producer and marketer of agricultural nutrients and industrial products.

Agrium, which had 2009 revenues of $9.1billion, has adopted a growth strategy to grow through incremental expansion of its existing operations and acquisitions as well as the development, commercialisation and marketing of new products and international opportunities.

Responding to Agrium's proposal, AWB said, ''The AWB directors advise shareholders that the Agrium proposal is conditional and subject to negotiation and may not lead to a definitive arrangement. Accordingly, at this stage, the merger implementation deed with GrainCorp remains on foot and AWB directors have not withdrawn or modified their previous recommendation that shareholders vote in favour of the merger with GrainCorp.''

Melbourne-based AWB is Australia's leading agribusiness and employs more than 2,200 people across more than 500 points of presence in Australia, India, Switzerland and Singapore to the People's Republic of China and Japan.

AWB owns a lending business to farmers, 22 grain depots, a 50 per cent stake in the Melbourne Port Terminal and has a 400-outlet strong Landmark division that is Australia's largest distributor of farm merchandise and fertiliser.

AWB was the largest Australian wheat exporter for 55 years until 2008, when its monopoly was taken away for paying $221 million in kickbacks to the Iraq regime in order to win contracts under the UN oil-for-food programme. This forced the government to deregulate the industry and draw up new grain export laws.

Opening up of wheat industry saw global majors like Bunge, Glencore, Viterra and Cargill enter the Australian wheat export sector and dethrone AWB as Australia's largest exporter of wheat.

It also hurried the country's agribusiness sector to consolidate, although few domestic mergers were successful. The December 2008 merger between AWB and ABB Grain collapsed as some directors of ABB failed to grasp the benefits accrued to the grain industry with the merger. (See: Australia's AWB and ABB Grain call off merger talks) 

According to analysts, AWB shareholders are likely to agree to Agrium's higher offer unless GrainCorp comes up with a better proposal. GrainCorp has so far refused to comment on Agrium's offer.

The Australian regulator would have closely scrutinised GrainCorp's offer, but Agrium's proposal will not face scrutiny since the acquisition of AWB by BrainCorp would lead to GrainCorp controlling majority of Australia's grain trade.

However if AWB agrees to Agrium's offer, it will have to pay a A$8.6 million break-up fee to GrainCorp.