Viterra takeover report touts better export ability, flags competition concerns
The Canadian Press – ONLINE EDITION
The Viterra terminal is seen in Burnaby, B.C, on May 5, 2012. THE CANADIAN PRESS/Jonathan Hayward
REGINA – There are both potential upsides and downsides to Glencore’s $6.1-billion takeover of Regina grain handler Viterra (TSX:VT), says a report released by the Saskatchewan government Friday.
The report by Informa Economics, commissioned by the province, says the transaction is likely to improve Saskatchewan farmers’ ability to export their crops worldwide and cement the province’s reputation as being open for business.
But its says the deal — which would see Glencore sell much of Viterra’s Canadian business to Richardson International and Agrium Inc. — raises some concerns about competition for crop nutrients, such as nitrogen.
The effect on employment in the province is expected to be mixed and the impact on provincial coffers is expected to be modest.
Saskatchewan Agriculture Minister Bob Bjornerud said the federal government must weigh both the pros and cons in deciding whether the takeover by the Swiss-based commodities giant is of net benefit to Canada.
“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,” he said in a release.
The deal will give Saskatchewan farmers better access to international markets just as the Canadian Wheat Board’s monopoly over the sale of wheat and barley comes to an end, the report said.
It also has “generally positive” implications for Saskatchewan’s position in the international grain industry.
“The acquisition by Glencore will tie Saskatchewan agriculture into a leading international agricultural commodity marketing network, which will be much needed in a post-CWB environment,” it said.
“Glencore is particularly strong as a marketer of wheat into the Middle East, North Africa and Southern Europe, and it has a strong presence in grains in the (European Union). Glencore also has offices in Turkey, Egypt, Dubai and Morocco, where it has the ability to discharge and store wheat at destination.”
Once concern flagged in the report is that Calgary-based Agrium might be able to raise nitrogen prices, since the deal will make it even more vertically integrated in the farm inputs industry.
It’s already a big producer and wholesaler of fertilizer, and the deal will lead to a larger retail footprint.
But the report says there’s no evidence Agrium intends to jack up fertilizer prices, and that the company’s structure provides safeguards against such behaviour.
It said the sale of grain elevators to Winnipeg-based Richardson is expected to have a “minimal” impact on competition in the grain handling industry.
The deal’s effect on employment is expected to be mixed, with jobs at grain elevators, retail facilities and processing plants remaining unchanged.
It could result in some head-office job losses, but highly-paid Viterra executives who had been based in Calgary will likely move to Regina. where Glencore intends to set up a base for its North American agriculture operations.