WESTERN PRODUCER — The Wheat Growers Association has concerns about the rumoured merger of Viterra and Bunge, two grain industry giants.
“They would have a very high percentage of (grain) sourcing and export without some divesting,” said Jim Smolik, stakeholder relations officer with the association.
This would be the second attempt at a merger. The first occurred in 2017 when Glencore, the parent company of Viterra, offered to buy Bunge.
The goal was to create a grain company rivalling Minneapolis-based Cargill Inc., and Chicago’s Archer Daniels Midland, North America’s two dominant agricultural companies, according to a recent Globe & Mail article.
“Now the tables have turned, with Bunge shareholders expected to control the combined companies and Glencore becoming a minority partner,” according to the Globe story.
“Bunge has a US$14 billion market capitalization and in a recent interview (Bunge chief executive officer Gregory) Heckman said the company has the firepower to make a large acquisition.”
Bunge is the world’s largest oilseed processor, while Viterra is one of North America’s largest grain handlers.
J.P. Morgan equity research estimated the combined company’s market capitalization would be around $25 billion, compared to ADM’s $38.9 billion, according to a Reuters story.
Viterra owns 59 grain elevators, eight special crops facilities, six port terminals and two oilseed processing plants in Canada.
It operates or jointly operates two port terminals in Vancouver, one in Prince Rupert, B.C., two in Thunder Bay, Ont., and one in Montreal.
The oilseed processing plants are in Becancour, Que., and Ste. Agathe, Man. Viterra also announced in 2021 plans to build the world’s largest integrated canola crush facility in Regina.
The remaining grain elevators and special crops facilities are located primarily on the Prairies and have a combined two million tonnes of storage capacity.
Bunge did not respond to repeated requests to provide a list of its Canadian assets.
But according to its website, it operates oilseed crush plants in Fort Saskatchewan, Alta., Nipawin, Sask., Harrowby, Man., and Altona, Man. It is also building a new crush plant in Lamont, Alta.
Bunge also owns vegetable oil refineries in Edmonton, Wainwright, Alta., Nipawin, Harrowby and Altona.
The company does not list any grain elevators or export terminals in Canada.
However, it has a 25 percent ownership stake in G3, which operates 19 grain elevators in Canada, most of which are on the Prairies.
G3 owns or co-owns port terminals in Vancouver, Thunder Bay, Hamilton, Ont., Trois-Rivieres, Que., and Quebec City, as well as the laker vessel G3 Marquis.
Bunge also has a 29 percent ownership interest in Merit Functional Foods, a manufacturer of pea and canola proteins that was placed in receivership earlier this year.
Smolik said the amount of combined port facility ownership would be staggering.
“That would be a very big concern if they were able to maintain all of their port position,” he said.
It would make it even more difficult and expensive for grain buyers who have no port assets to get product to market.
“(The new company) may have to divest portions of terminals or create joint ventures or something,” he said.
The combined canola crush capacity would also be huge, and so would its fleet of 78 grain elevators.
Smolik wonders if Bunge’s G3 partner, SALIC Canada Ltd., might buy out Bunge’s share in some of their joint assets if the newly formed company is forced to divest.
Smolik is also concerned about who would decide on the Canadian operations. Would the marching orders come from Regina or Chesterfield, Missouri?
“We are quite a bit different than our neighbours to the south,” he said.
Smolik wonders if a merger might kill plans by one or both entities to expand their operations through new builds if they remained separate businesses.
A lot of his questions will likely be addressed by the Competition Bureau if the merger rumour proves true.
The Bureau said it would be inappropriate to comment on a hypothetical transaction.
However, it acknowledged that it must be given advance notice of proposed transactions when the target’s Canadian assets or revenues exceed $93 million and when the combined Canadian assets or revenues exceed $400 million.
“Should we determine that a proposed transaction is likely to harm competition, we will take appropriate action,” Bureau spokesperson Yves Chartrand said in an email.
Bunge values its Canadian assets at US$334 million, according to the company’s 2022 annual report.
Viterra has the bigger asset base in Canada, so presumably it would be worth more, but there was no similar breakdown provided in .
