Local

Winnipeg Free Press - PRINT EDITION

Smaller firms lose out in Viterra deal, analyst says

By: Bill Redekop

Posted: 03/30/2012 1:00 AM | Comments: 0

MORE consolidation in the grain industry is likely to follow the takeover of Viterra, says the Dominion Bond Rating Service.

With the $6.1-billion takeover of Viterra by the triumvirate of Swiss company Glencore, Winnipeg-based Richardson International, and Calgary-based fertilizer giant Agrium, the first two companies, Glencore and Richardson, along with Cargill, will control 80 per cent of Prairie grain.

Anil Passi, DBRS grain industry analyst, expects the big guys -- pending approval from the federal Competition Bureau -- to eventually gulp down much of the remaining, fragmented 20 per cent that's left.

Passi wouldn't name names but some of the smaller players include Winnipeg-based firms Paterson & Sons and Parrish and Heimbecker, and even the Canadian operations of Louis Dreyfus.

"I think that some of those (small operators) will be consolidated just because they wouldn't have scale to offer as many services (like sales of diesel fuel, herbicides, and fertilizer sales) as the big three are able to offer," he said.

Also, the smaller companies may not be as equipped to make international sales for wheat and barley, now that the Canadian Wheat Board has been forced to relinquish its seller's monopoly. As well, the wheat board used to delegate car allocations and always held back some car allocations for smaller handlers. "Now, if it's for open bid, the big guys are going to try to get all the good, 1,500-car lots," he said.

"Some of the smaller companies, who offer a handful of elevators, they might just say, 'In this new era, with all this scale and free markets, I can't offer the service and it might be time for me to get out.' "

Passi called Richardson International "very disciplined and very steady operators" and described the grain industry as "healthy and stable" from a company standpoint.

RURAL SIGNS -- A service garage opened in February in Birtle, on the west side of the province, with this name: the Garage Mahal. The car repair shop is owned by David Cyrenne and wife Melodie Lane, whose monicker would make a nice street sign.

LAC DU BONNET -- Auditor general Carol Bellringer, who has decided to review the strange goings-on in the RM of Lac du Bonnet, probably doesn't need help with her math... but here goes.

One of the complaints in the RM is from another councillor, Vera Cardinal, that Reeve Karl Gugenheimer is in a conflict of interest because he is also the RM's longtime building inspector.

As reeve, Gugenheimer appoints members of the planning district committee, who are then his boss when he's the building inspector. Cardinal says it makes Gugenheimer the boss of the people who are supposed to be his boss.

Confusing? Rob Craigen, University of Manitoba mathematics professor and owner of a cat named Archimedes, after the famous Greek mathematician, thought so.

It reads like a math puzzle: Gugenheimer, as reeve, appoints three of the five members to the planning committee. The other two appointments are by the mayor for the Town of Lac du Bonnet. OK, so that's 60 per cent control for Gugenheimer.

However, Gugenheimer is restricted by having just four people on council from whom to choose his three appointments. That seriously erodes his apparent 60 per cent control.

In reality, Gugenheimer can only prevent 25 per cent of council from being on the planning board. So multiply 60 per cent by 25 per cent and that equals 15 per cent influence.

"It's the veto that really counts," Craigen said, but added that trying to quantify this kind of influence "is absurd."

So Gugenheimer really doesn't have much choice who sits on the planning board because he can only exempt one person, in this case the complainant, Cardinal.

Gugenheimer also has opinions from two lawyers who say he is not in a conflict of interest.

bill.redekop@freepress.mb.ca

Republished from the Winnipeg Free Press print edition March 30, 2012 A15

Factual inaccuracy? Something missing? Help improve our journalism.

Know about news? Share your story suggestions, photos and video.

Spelling error? Punctuation problem? Send us an email if you’ve found a typo.

More Local

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.