Reuters: Mergers News: Canada farm groups want curbs on Agrium's clout

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Canada farm groups want curbs on Agrium's clout Jun 6th 2012, 18:25 Wed Jun 6, 2012 2:25pm EDT * Agrium to get 232 supply stores in Glencore/Viterra deal * It could also control about half of nitrogen production By Rod Nickel WINNIPEG, Manitoba, June 6 (Reuters) - Two influential Canadian farm groups will urge the country's Competition Bureau to scale back Agrium Inc's proposed purchase of Viterra Inc assets, saying Agrium might become too powerful in the sale of fertilizer and other crop supplies. In a C$6.1 billion ($5.9 billion) deal, global commodities giant Glencore International PLC will buy Viterra, Canada's biggest grain handler, this summer, pending regulatory approval. It will then sell off some of Viterra's parts to farm retailer and fertilizer producer Agrium and to privately owned Canadian grain handler Richardson International Ltd. The takeover itself faces little opposition from farmers, some of whom relish the global marketing muscle Glencore would bring to the Canadian Prairies. Agrium's role has struck a nerve, however, as it would purchase 232 Viterra farm-supply outlets in a package worth C$1.15 billion, becoming the dominant Canadian retail seller of fertilizer, seed and chemicals. One group, the Western Canadian Wheat Growers, plans to ask the Competition Bureau to force Agrium to divest some outlets in areas where there would be little competition for farmers' dollars as a result of the deal. "Within a certain radius, there's got to be good competition," said Wheat Growers' Executive Director Blair Rutter. Some towns have only Agrium- and Viterra-owned outlets, and the Competition Bureau should also look at which independent dealers are supplied by Agrium to get a clear picture of how much competition there is, especially in southern Alberta, Rutter said. Agrium already operates 65 Canadian stores under the Crop Production Services (CPS) banner, and is the top farm retail supplier in the United States. For Wild Rose Agricultural Producers, the largest farmer group in Alberta, Agrium's potential dual role as Canada's biggest nitrogen fertilizer producer and its largest farm supplier creates the most concern. By adding Viterra's minority stake in the Canadian Fertilizers Ltd plant at M edicine Hat, Alberta, Agrium would own 53 percent of Canadian ammonia production capacity, and 49 percent of urea production capacity, according to consultant Informa Economics, which reviewed the takeover for the Saskatchewan government last month. "That's the real concerning part, having that much ownership of the fertilizer part causing us trouble down the road," said Lynn Jacobson, a farmer and president of Wild Rose, which plans to ask the bureau to scale back Agrium's purchase. Kevin Helash, Agrium's regional manager of retail for Canada and the Pacific Northwest, said there will still be plenty of farm-supply competition since the cost of opening a store is as little as C$150,000. Agrium competitors would still make up two-thirds of the market, he said. The Competition Bureau has already said it won't block Glencore's takeover of Viterra, but has not yet ruled on the side deals with Agrium and Richardson. The Canadian government will decide in a separate process whether Glencore's takeover of Viterra is of net benefit to Canada. The Grain Growers of Canada sees a legitimate competition concern about Agrium, but only in some pockets of the Prairies, said Executive Director Richard Phillips. "Ninety percent of what Agrium is doing will be fine with producers," he said, adding the group will not make a submission to the bureau. GROW, a group of independent farm-supply dealers, sees Agrium's potential new clout as mostly positive, since its expertise is in crop inputs rather than grain-handling, said general manager Greg McDonald. But McDonald said farm suppliers are nervous about Agrium's strength in the wholesale production of nitrogen-based fertilizer. Potentially, Agrium could supply its own stores more cheaply than it would sell to competitors, he said. "We're a bit concerned when one of your big suppliers also becomes one of your biggest competitors," McDonald said. Agrium will continue to run its wholesale and retail operations separately, Helash said. "We do have to look every one of our customers in the eye and say, 'we're selling to you competitively'." Agrium is the No. 3 nitrogen producer globally, and faces stiff wholesale competition in Canada from the world's biggest maker of the crop nutrient, Yara International ASA. "The pond is not Western Canada for nitrogen production and supply," Helash said. "We believe the pond is global." The Australian Competition and Consumer Commission is scheduled to report on the Glencore takeover of Viterra on Thursday. Under the deal, Glencore would acquire Viterra's grain-handling and storage assets in Australia and sell off 17 farm-supply outlets there to Agrium. Glencore's takeover of Viterra is expected to close by the end of July. Link this Share this Digg this Email Reprints

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