Agribusiness ABB Grain has confirmed that it has received a conditional takeover offer from Canada's Viterra that values the company at more than $1.5 billion.
"ABB advises that it has received a conditional and non-binding proposal from Viterra to acquire all of the shares in ABB via a scheme of arrangement," ABB said in a statement.
The company's shares surged 20 per cent when it resumed trading after the announcement and shortly after midday stock was $1.30 higher at $8.30.
ABB said the proposal was within the range of $9 to $9.50 per ABB share and comprised a mix of cash, Viterra shares and franked dividends.
The offer is a big premium on the company's share price, which was $7 before being placed in a trading halt.
"ABB and Viterra are engaged in discussions which may or may not lead to a binding agreement," ABB said.
"There is no assurance that agreement will be reached or that a transaction will take place at all or within the reported range.
"The proposal is subject to a number of conditions."
ABB has appointed JP Morgan as financial adviser.
Viterra, which is based in the province of Saskatchewan, has a similar profile to ABB Grain - an agricultural company focused on grains, seeds with a supporting handling network.
It has revenue of more than $C4 billion and was formed from the merger of two Canadian agribusiness companies two years ago.
The Canadian proposal threatens to become a catalyst for the long-mooted consolidation of the Australian agribusiness sector.
ABB Grain and AWB proposed a merger last year, but the two companies could not agree on terms.
The companies could not agree on a valuation split, while some ABB directors were also concerned about any liabilities AWB may have to carry arising out of the Iraqi wheat scandal.
The aim was to create an Australian giant that would have been better placed to compete as one company in the new deregulated export grains market.
AWB managing director, Gordon Davis, said late last year that Australian agriculture lacked economies of scale.
"Australian players are small, relatively undercapitalised and have different levels of experience," he said.
"With deregulation, global companies are more active. The Australian industry structure still needs a shake-up to get some scale."
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