FCL confident purchase of Viterra input stores will see returns

The once dominant player in Western Canada’s crop input business continues to shed assets.

A few years ago, Viterra operated 258 retail centres, representing a 35 percent share of the market.

Today the company has either sold or has deals in place to sell the vast majority of those crop input outlets.

The latest agreement is to transfer 17 centres to Federated Co-operatives Limited (FCL) for an undisclosed amount. The deal includes eight sites in Alberta, eight in Saskatchewan and one in Manitoba.

“It complements our existing ag centre operations throughout the three prairie provinces and at the end of the day it will generate a positive return on our investment,” said Daryl Oshanek, spokesperson for FCL.

FCL already operates 140 ag centres. Crop input sales have overtaken home and building supplies as the third biggest of FCL’s six business segments, with sales of $353 million in 2012. Food ranks second and energy is first.

“Our crop supply sales continue to improve. We expect to see record sales at the end of this year,” he said.

That forecast is based on increased crop protection sales driven by heightened disease pressure in 2013, strong fertilizer sales and an anticipated increase in grain bin sales to house what Statistics Canada forecasts to be a record crop.

“This sector is just looking positive in our eyes going forward,” said Oshanek.

FCL anticipates the transaction will pass all regulatory hurdles and close by the end of September. At that time FCL will transfer ownership and operation of the assets to local retail co-ops operating in the 17 communities. If a retail co-op doesn’t want the centre, it will be operated as a stand-alone FCL site.

“But rest assured, I can almost guarantee that each of the retails sees these as really benefitting their communities, their members, and that these are going to be good investments,” said Oshanek.

It was more efficient for FCL to negotiate the deal on behalf of its member co-ops.

“It just makes it easier. Viterra is dealing with one company in the dispersal of its assets rather than individual parties,” he said.

The vast majority of Viterra’s retail outlets have been sold to Agrium Inc. pending regulatory approval of that deal, which was first announced March 20, 2012.

Agrium is purchasing 217 farm centres in Western Canada and 13 in Australia.

The company also acquired a 34 percent interest in a nitrogen fertilizer production facility in Medicine Hat, Alta., which it has since sold to CF Industries Holdings Inc.

The purchase price for all of the Viterra assets was $1.775 billion. The sale to CF Industries netted $939 million back to Agrium.

Richard Downey, a spokesperson for Agrium, said the review by the Competition Bureau is expected to be finalized by the end of September.

Another 13 of Viterra’s crop input centres were sold to Richardson as part of the deal where the rival grain company acquired 19 of Viterra’s elevators and other port and milling assets. That leaves 11 crop input centres out of the original 258. Viterra did not respond to an interview request inquiring about what happened to the remaining 11 facilities.

FCL will be providing offers of employment to all of the Viterra employees working at the 17 centres it is acquiring with similar terms and conditions of employment as other employees within the co-operative retailing system.

The Grain Services Union says FCL has indicated that successor rights and the collective agreement in place with Viterra will be respected at the eight unionized Saskatchewan locations.

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