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Richardson top grain handler

Local firm pays Glencore $900M for Viterra assets

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In one fell swoop, Winnipeg's Richardson International Ltd. has vaulted to the top of the Prairie grain-handling business.

In a divvying up of assets in the immediate post-wheat-board era, Richardson International agreed to pay the new owners of Viterra, Glencore International, $900 million for 19 elevators, boosting the Winnipeg family-owned business's share of the market to 34 per cent from 25 per cent.

Richardson also gets significant port-terminal assets and the largest independent oat-processing operation in North America.

The shuffling of the deck in the wake of the $6.1-billion acquisition of Viterra by Glencore, announced Tuesday, means Richardson and Swiss-based Glencore will each have 34 per cent of the market. Cargill Ltd. will have between 20 and 25 per cent.

In dollar terms, the deal was 31/2 times larger than Richardson's asset acquisition in the aftermath of the Agricore United-Sask Pool merger that formed Viterra in 2007.

Curt Vossen, Richardson International's CEO, said the company is as enthusiastic as it's ever been about prospects for the western Canadian agricultural industry -- a business it has been in for 155 years.

"It is totally exciting for this organization and for the industry, and we think it's great for Winnipeg," he said. "We're very proud."

All former Viterra employees will be offered work with Richardson, and the company will add staff to beef up its Winnipeg executive and administration head-office operations, Vossen said.

He was particularly excited about the company's instant dominant position in the oats-processing business.

"We now own the largest independent oats-processing business in North America," he said.

Equity analysts and farm business consultants were hard-pressed to find any downsides to the deal.

Jason Zandberg, an equity analyst with PI Financial Corp. in Vancouver, said the prices paid by Glencore and Richardson may mean higher multiples for other ag-industry players.

"Funds that held Viterra shares might very well flow investment into other Canadian agricultural companies and raise multiples all around."

The deal was clearly orchestrated to pass the Competition Bureau's sniff test. Although Glencore -- a foreign company -- is buying a public Canadian company, Vossen said 57 per cent of Viterra's Canadian assets will remain in Canadian hands. (Calgary-based Agrium will pay $1.8 billion for Viterra's retail network.)

Brian Hayward, former CEO of Agricore United, said the level of competition from the Prairie farmer's point of view might even become more attractive when the deal closes and achieves regulatory approval.

"Glencore has an extensive international network of commodity traders -- more extensive than Viterra had," he said. "Arguably, you could say it will provide more competition for Richardson and Cargill relative to Viterra because of that international network."

Glencore has been a significant buyer of Canadian grains and oilseeds, but never at the farm gate.

"They used to deal with people like me. Now farmers can deal with them directly," Vossen said. "I think we are going to have our hands full, so to speak. That's why I like the fact that we will be of equivalent size to start out with."

Some said they believe Glencore's presence will not hurt farmers looking for the best price for their crop.

"I can't for the life of me figure out how this will change the farmers' process in making marketing decisions on who they are going to do business with," said Brenda Tjaden Lepp, founder and co-owner of FarmLink Marketing Solutions. "We have seen the logos on the elevators change three or four times in the last 10 to 15 years. It's just another logo on the same elevator."

"It's a good sign for the industry," said Doug Chorney, president of Keystone Agricultural Producers. "We're pleased to see Richardson further committing to the western Canadian agri-food industry. They're a key player and they have been good for Manitoba and Winnipeg, and to see them become a bigger player in the industry is a positive thing."

What Richardson gets in the Viterra deal:

19 high-efficiency, high-throughput grain elevators: two in Manitoba (Red River South and South Lakes); 11 in Saskatchewan; four in Alberta; two in B.C.

25 per cent of Cascadia Terminal in the Vancouver port (Richardson already owns a small Vancouver terminal and a 24 per cent interest in the Prince Rupert terminal).

One port terminal in Thunder Bay (Richardson will now own two in Thunder Bay and Glencore will own two).

The Can-Oat Milling company, with plants in Portage la Prairie, Martensville, Sask., and Barrhead, Alta.

21st Century Grain Processing, with plants in South Sioux City, Neb., and Dawn, Texas.

Republished from the Winnipeg Free Press print edition March 21, 2012 B6

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