A report on the proposed sale and split-up of Canada’s largest grain handler predicts Saskatchewan’s farmers are "likely to benefit."
The report, prepared by Informa Economics for the government of Viterra’s home province of Saskatchewan and made public Friday, lays out various pros and cons of the proposed friendly takeover of Viterra by Swiss commodity giant Glencore International.
"On balance, Saskatchewan farmers are likely to benefit from future industry developments," Informa said in its report, which the province commissioned in March.
The consulting firm cites "a combination of factors" including access to Glencore’s "superior" global network, and "enhanced competition" through the sale of several Viterra handling assets to the No. 2 grain handler, Winnipeg’s Richardson International, and through the end of the CWB monopoly on Prairie wheat and durum marketing.
Informa noted that the distances among competing grain elevators "would not change significantly" and that the sale to Richardson "provides a more even playing field."
There would also be "limited impacts" on the distances among competing retail crop input facilities if Glencore’s proposed sale of much of Viterra’s Prairie ag retail network to fertilizer giant Agrium goes ahead, Informa added.
Canada’s Competition Bureau said last week it won’t oppose the sale of Viterra to Glencore, although Glencore’s proposed sales of Viterra assets to Richardson and to Calgary-based Agrium are still to be considered.
U.S. antitrust officials last week also let a mandatory waiting period expire without opposing Viterra’s sale to Glencore.
The federal government still must review the proposed foreign takeover as per the Investment Canada Act. Viterra shareholders still must also vote on Glencore’s bid at a meeting May 29 in Calgary.
Informa’s report, on which the Saskatchewan government will base its recommendations to its Ottawa counterparts, also flags several potential issues with the deal.
Among those is the potential market power afforded to Agrium if it takes over Viterra’s retail input facilities and stake in the Canadian Fertilizer Ltd. nitrogen fertilizer plant at Medicine Hat, Alta.
Informa’s concern is Agrium being handed the ability to "exert pressure on nitrogen prices, due to vertical integration" of over 50 per cent of Canada’s nitrogen production capacity with its largest ag retail network.
"However, there is no evidence this will occur," and Agrium’s structure, which keeps its wholesale and retail operations separate, makes it "less likely," Informa said.
Informa also flagged the potential for job losses. All of Viterra’s field staff would likely keep their jobs at elevators, terminals and other facilities after the proposed carve-up, but the company’s Regina head office would likely see some jobs lost, Informa said.
On the other hand, Informa said, Glencore has pledged to make the Regina office its North American agricultural headquarters and platform for expansion into the U.S., and to "repatriate" Viterra’s Calgary executive offices back to Regina.
Informa also noted Glencore’s pledge to increase capital expenditures by $100 million over and above Viterra’s previous projections for the next five years, expanding grain handling infrastructure both on the Prairies and at ports to meet demand for ag products.
"If the federal government approves this acquisition, we would want to see conditions put in place to hold Glencore to its commitments and to address the concerns raised in this report," Saskatchewan Agriculture Minister Bob Bjornerud said in a release Friday.
The province said it wants the federal government, through the investment review process, to ensure that if allowed to buy Viterra, Glencore would carry out its pledge to establish Regina as its North American headquarters, and its commitments on future investment, and maintain the current level of field staff.
The province would also ask for assurances that the deal would have "no adverse effect on competition in farm inputs."
"I was pleased to see that earlier this week, federal Agriculture Minister Gerry Ritz told the House of Commons that the review process would ensure competition will not be reduced," Bjornerud said Friday.
Glencore said Friday it "welcomes the conclusions of the Informa report released today, and looks forward to reviewing it in further detail."
The Swiss firm added it’s "particularly pleased that benefits to farmers are underscored."
Glencore said it would continue to work within the federal review process on a deal "we believe will be of significant benefit to Canadian farmers and the grains and oilseeds sector generally."
Glencore confirmed as Viterra’s six billion dollar suitor, March 20, 2012
Glencore/Viterra marriage clears regulators, May 5, 2012