Winnipeg, April 15 – A new privatized CWB will include the opportunity for farmers to gain equity in the grain handling company. However, that minority ownership stake could still be bought out in seven years.
It was announced on April 15 that G3 Global Grain Group will acquire a majority 50.1% interest in the former Canadian Wheat Board for C$250 million. G3 is a newly created joint venture between Bunge Limited and SALIC Canada Limited, which itself is a wholly owned subsidiary of Saudi Arabia’s Saudi Agricultural and Livestock Investment Company. The deal is set to be finalized by July 2015, and is still subject to certain closing conditions and adjustments.
The minority ownership interest (49.9%) will be held in trust for those producers doing business with the company through the continuation of the Farmer Equity Plan. That plan was originally created in 2013 when CWB lost its single-desk status and started the move towards privatization.
“At commercialization, the CWB will allocate all of that equity to a trust for the benefit of farmers. The trust will then own shares in CWB, representing 49.9% in the privatized CWB,” said Dayna Spiring, chief strategy officer with CWB.
Farmers will be allocated five dollars in equity in the trust for every tonne of grain delivered to CWB. That equity will then stay in the trust for a period of seven years, or until the trust is fully allocated, she added, noting that G3 will have an opportunity to buy out the farmer shares after that seven year period.
How quickly the trust is fully allocated will depend on how long it takes for the deliveries to add up to the 49.9% of the roughly C$500 million valuation of the company. At five dollars per tonne, that works out to just under 50 million tonnes of grain delivered to CWB.
“All deliveries from August 1, 2013, will be included in the equity plan,” said Spiring. The trust will be managed by three independent trustees, independent of CWB, G3 and government.
If there are dividends issued, farmers would participate in that. Farmers would also get liquidity if there was an IPO event, said Spiring.
While farmers are gaining equity, they won’t be considered individual shareholders. Rather, the trust will own the shares. If G3 chooses to buy out farmers it would be “a package deal,” with the trust representing one shareholder in the CWB, said Spiring.
“From G3’s perspective, we are really excited about the farmer’s equity position that’s available to producers in western Canada,” said Brett Malkoske, G3’s director of strategy and business development. “Anytime you contract with CWB, you will own units in the trust.”
“We’re really happy with the structure and we’re really happy to be working with farmers,” said Malkoske. When asked about the potential for buying out the farmer’s equity in seven years, he said that “we want to own this thing for a very long time, and we want to work with farmers for a long time. . . As we grow the company, additional capital will be required, and how farmers participate will be a call made by the trustees.”
G3 will be headquartered in Winnipeg at the CWB building, said Malkoske.
When the transaction is complete the company will encompass Bunge’s export terminal in Quebec City as well as four elevators in Quebec and CWB’s network of seven grain elevators in Western Canada and port terminals in Thunder Bay, Ontario and Trois Rivieres, Quebec. It also includes four additional state-of-the-art grain handling facilities in Bloom and St. Adolphe, Manitoba, and Colonsay and Pasqua, Saskatchewan that are currently under construction by CWB.
