Viterra takeover raises question of competition in Saskatchewan

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The proposed takeover of Viterra Inc. , Canada's largest grain handling company, has run into some opposition from the Saskatchewan government, which is concerned the deal could lessen competition in one key area.

Provincial Agriculture Minister Bob Bjornerud said farmers have been voicing their worries for weeks that the takeover will decrease competition in the sale of agricultural products such as fertilizer, seeds and farm equipment.

"Any time there's a possibility of losing a little bit of the competition that we already have, I know they are concerned and I've had that brought to my attention a number of times in the last couple of weeks," Mr. Bjornerud told reporters Friday. "So it's a concern that we really have."

Swiss-based Glencore International Inc. has launched a $6.1-billion bid for Regina-based Viterra, but it plans to sell a number of Viterra's assets. That includes unloading nearly all of Viterra's chain of 258 retail stores. Glencore plans to sell the stores to Agrium Inc. for $1.8-billion. Calgary-based Agrium is major fertilizer producer and it operates more than 1,200 retail stores in Canada, the United States, Australia and elsewhere.

A government-commissioned review of the transaction by Informa Economics noted that if the deal goes through Agrium will control 42 per cent of the retail market in Saskatchewan, compared to 37 per cent presently for Viterra. Agrium also controls a majority of the wholesale market for nitrogen fertilizers, giving the company a potentially dominant position in both retail and wholesale.

However, the review pointed out that Agrium operates its wholesale and retail divisions separately. The concern arises if the company decides to co-ordinate the two going forward.

Mr. Bjornerud said the government will raise that issue with Industry Canada and the Competition Bureau, which will review the proposed takeover in detail if it is approved by Viterra shareholders on May 29. The bureau has given preliminary approval to the takeover, but has not looked at the details.

Agrium spokesman Richard Downey said the company has no intention of merging its retail and wholesale operations. "I guess I was a little surprised that they would imply that we might even consider changing our business model in Canada on the retail and wholesale side where we have been operating that way in the United States and Argentina for 20 years," he said Friday. "That's one surefire way to ruin both businesses."

Mr. Bjornerud said other parts of the deal are largely positive, including Glencore's plan to sell some Viterra grain elevators for $800-million to Winnipeg's Richardson International Ltd. That sale involves 19 of Viterra's 92 elevators, substantially boosting Richardson's share of the grain-handling business. Viterra controls about 45 per cent of grain-handling in Canada and that will fall to about 35 per cent after the takeover. Richardson's share will increase from around 25 per cent to about 34 per cent.