What in the World?
May-June 2007
What in the world is going on with Saskatchewan Wheat Pool? The company has barely pulled itself out of the financial black hole that marked 2003 that it is now launching a takeover of Agricore United with a hostile offer. A daring if not reckless move: let’s not forget that Agricore is twice the size of Saskatchewan Wheat Pool. In fact, Agricore is ranked number one in the Canadian grain industry and is a major player in the field of crop inputs. This latest announcement has taken everyone by surprise!

Terry Baker, the president of Saskatchewan Wheat Pool, addressed Agricore shareholders in a letter and stated that he was expecting about 60 million dollars in synergy following the merger. He is hastening shareholder acceptance of his offer, which he states, will make the newly merged business more efficient. But Agricore’s officers don’t see things the same way, convinced of their company’s strength and vigour, they see no reason for a merger. Furthermore, the offer is considered low. And finally, nobody really wants to say it but… coming from an old rival, this makes the offer even more appalling.

New revelation: while SaskPool is waiting for a response from Agricore shareholders and the Competition Bureau is examining the project, Agricore’s knight in shining armour, James Richardson, makes its appearance. The offer now seems even more attractive. And this time, synergy is up to 62 million dollars. But who exactly is this saviour? James Richardson is a large company active in the grain industry, in agri-business (they are Pioneer) and in canola-based food products. The company proposes to join Agricore and create, with help from the Ontario Teachers’ Pension Plan, a large-scale business that would handle 14 million tons of grain with projected overall sales of 5 billion dollars.

As for farmers, they don’t particularly like these merger projects. They know full well that should either party merge with Agricore, the result would undoubtedly include grain elevator shut downs and increased transportation costs, as well as one less competitor to worry about. What can they do? Nothing. They have nothing to say about the direction these companies will take, companies their grand-fathers built at the start of the last century – companies their fathers tirelessly supported for years and years. SaskPool, just like Agricore, used to be genuine cooperatives until a wave of demutualization struck western Canada. The supreme irony is that SaskPool’s financial partner in this merger project, Third Avenue Management LLC, insists that the new business to emerge from this union would benefit from better management, making a reference that there were still a lot of farmers sitting on Agricore’s Board of Directors. What nerve!

As I write these lines we still don’t know the reaction of Agricore’s shareholders. Nor do we know about all of the offers they are getting: David Newman, National Bank Financial analyst, believes that SaskPool will come back with another offer… in cahoots with Archer Daniel Midlands (ADM)! Let’s see, ADM owns 28% of Agricore and to ensure a merger, 75% of shareholders need to accept. So in reality, ADM has veto power. However, Agricore’s rules contain a provision that ADM must accept a merger project if the latter is recommended by the board or make a better offer of its own.

What in the world is going on with Saskatchewan Wheat Pool? Could all of this merger mayhem be about a sudden enthusiasm for grain as energy? Prices are on the rise and obviously big business wants to guarantee its share. It’s also a race to get the cheapest grain. Especially now that Saskatchewan Wheat Pool just signed a contract with Terra Grain Fuels to turn grain into ethanol. Should the day come when someone wants to demutualize your cooperative, on the premise that they are doing it for your good… believe them. They really want your good(s) and if you’re not careful, they’ll get them.

 

Colette Lebel, agr.
Director of Cooperative Affairs
La Coop fédérée
Email: colette.lebel@lacoop.coop
Fax: (514) 858-2025
 



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