AWB is poised on Monday formally to ditch its recommendation for a tie-up with GrainCorp, triggering a break fee payment, after agreeing terms on a Aus$1.2bn ($1.1bn) takeover by Canada's Agrium.

The Australian grain handler has told Agrium that it consider the fertilizer group's offer, equivalent to Aus$1.50 a share, a better deal for investors than the all-stock merger with GrainCorp it agreed at the start of the month.

This tie-up was worth about Aus$1.05 a share at share values when it was announced.

AWB is compelled under its merger agreement with GrainCorp to give three days' notice before changing its recommendation, a move which would trigger the payment of a break fee of Aus$8.6m to the disappointed suitor.

"Agrium anticipates that AWB will recommend the Agrium transaction [on Monday]," the Canadian group said.

GrainCorp to return?

While GrainCorp could yet come back with a higher offer, this is not expected by many investors given the hefty premium Agrium is offering.

"We cannot discount the prospect of GrainCorp revising its proposal," analysts at Australian broker WilsonHTM said,

"However, this would involve GrainCorp offering AWB shareholders a disproportionately greater share of equity in the combined entity. We therefore assess this option as unlikely to proceed."

If sticking to an all-share deal, just matching Agrium would mean offering AWB investors about 49% of the combined company, compared with 42% under the original proposal, Wilson said.

Landmark landmark 

Agrium, which said it had completed its due diligence on AWB, added that its takeover plans would hand "significant strategic and financial benefits to a wide array of stakeholders".

The Canadian group, which also runs a chain of North American farm retailers, has highlighted the potential for improving the Australian company's Landmark rural supplies network.

"We are particularly excited about the future of… [bringing] a greater choice of products and services to AWB's grower customer base," Mike Wilson, the Agrium chief executive, said.

AWB shares closed up 2.4% at Aus$1.485 in Sydney.