Bloomberg News

Glencore Bid for Viterra Raises Retail Concern, Report Says

May 11, 2012

Glencore International Plc (GLEN)’s proposed C$6.1 billion ($6.1 billion) takeover of Viterra Inc. (VT) may reduce competition in retail fertilizer sales, according to a report prepared for the Saskatchewan government.

Glencore’s acquisition of Canada’s largest grain handler includes a side deal to sell 90 percent of Viterra’s domestic retail outlets to Agrium Inc. (AGU), a Calgary-based fertilizer producer that is already North America’s largest farm retailer.

“There is some concern about competition in the farm input sector –- particularly regarding nitrogen fertilizers –- due to the acquisition of most of Viterra’s retail input facilities by Agrium,” according to a summary of the report by Informa Economics Inc., a Memphis, Tennessee-based independent research company, that was released today.

The report says that Glencore’s purchase of Regina, Saskatchewan-based Viterra will initially have “minimal impact” on competition in grain handling and the only job losses will be limited to head-office employees. Regarding the sale of the retail assets to Agrium, Informa says there is no evidence the company would take “anticompetitive actions.”

“If Agrium’s retail and wholesale business units were coordinated in the future, the firm might have the ability to sustain price increases in some locations,” according to the report. “Thus, there is some concern about competition.”

‘Ethical Standards’

Richard Downey, a spokesman for Agrium, said the company won’t use its separate fertilizer-production and farm-retail operations to influence prices or run those businesses any differently than it does now.

“We pride ourselves on complying with all laws and having the highest ethical standards,” Downey said today in a telephone interview. “We’ve been in farm retail for 15 years in Argentina and 20 years in the U.S. I don’t see why it would be an issue in Canada.”

As part of the proposed Viterra acquisition, Glencore also agreed to sell assets to privately held Richardson International Ltd., Canada’s second-largest grain handler, including 19 grain elevators, a stake in a Vancouver export terminal and two Viterra milling and processing businesses. Richardson is a unit of Winnipeg-based James Richardson & Sons Ltd.

Glencore, the world’s largest publicly traded commodities supplier, said in a May 4 statement that it received notification that Canada’s competition commissioner doesn’t intend to oppose the acquisition. The Baar, Switzerland-based company also said the U.S. waiting period for antitrust review had expired on May 3.

Review Process

Glencore said in a statement today it’s working within the Investment Canada review process to gain regulatory approval to complete the transaction.

“It would appear that the opportunities outweigh the risks for Saskatchewan,” Glencore said.

Under Canada’s foreign-takeover law, known as the Investment Canada Act, the government reviews foreign takeovers valued at more than C$330 million in assets to ensure the transaction represents a “net benefit’ to the nation.

The government has 75 days to review the takeover after being notified by the foreign investor, unless the investor agrees to a further extension.

Potash Corp. Deal

In 2010, Canada’s federal government rejected a $40 billion hostile bid by Melbourne-based BHP Billiton Ltd. (BHP) for Potash Corp. of Saskatchewan Inc., saying the proposal for the world’s largest potash miner didn’t provide a ‘‘net benefit” for the country.

Saskatchewan Premier Brad Wall, who opposed the Potash Corp. bid, said last month the sale of Viterra is “a lot different” in terms of both the scope and assets involved.

Saskatchewan said in a separate statement today that it wants the federal government to make approval of the acquisition conditional on Glencore keeping to commitments to establish its North American headquarters in Regina and investing C$100 million in the Canadian grain-handling industry in the next five years.

Viterra declined 1 cent to C$15.96 at the close in Toronto, while Agrium rose 1.1 percent to C$83.56. Glencore fell 2.6 percent to 386.1 pence in London.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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