Parrish & Heimbecker reaches a deal to buy 10 western Canadian elevators from Louis Dreyfus Commodities
Canadian-owned Parrish & Heimbecker Limited has taken a giant leap forward in expanding its network of western Canadian grain elevators and input centres.
The Winnipeg-based company announced last week that it reached a deal to acquire 10 Louis Dreyfus Commodities elevators located in Manitoba, Saskatchewan, Alberta and British Columbia.
According to a Sept. 4 news release, P&H will acquire LDC operations in Rathwell and Virden, Man., Dawson Creek, B.C., Tisdale, Aberdeen, Wilkie (Brass) and Kegworth in Saskatchewan, and Joffre, Lyalta and Rycroft in Alberta.
LDC will retain its grain terminal in Port Cartier, Que., and a canola crushing plant and refinery in Yorkton, Sask.
Financial terms of the deal were not disclosed.
The transaction is expected to close in the fourth quarter of 2019, subject to the satisfaction of regulatory requirements and customary closing conditions.
Over time, P&H intends to open crop input retail centres at all of the former LDC locations, said John Heimbecker, chief executive officer at P&H.
The addition of farm input retail facilities will involve significant capital investments over a number of years and is expected to create new employment opportunities at all of the locations involved.
The expansion of P&H farm retail will occur gradually, Heimbecker added, after LDC grain elevators have been integrated and the knowledge base of existing LDC staff has been assessed to determine the appropriate pace and order of investments.
The acquisition of LDC assets continues an aggressive effort by P&H to build a more competitive grain supply chain across Canada, consisting of grain terminals, flour milling facilities, feed mills, retail operations and elevators.
In terms of commercial grain storage capacity, the acquisition of LDC’s inland facilities will boost P&H’s country storage to more than one million tonnes at 30 locations across the West and will make P&H the third largest grain-handling company in Canada, behind Richardson and Viterra.
The company is also building a new export terminal at the Port of Vancouver, a project that will significantly increase P&H’s grain exporting capacity.
The west coast terminal project, an investment valued at more than $125 million, is scheduled for completion in late 2020 and will boost P&H’s export capacity by an estimated four million tonnes annually.
In a Sept. 5 interview, Heimbecker said increased export capacity at the West Coast was a key factor behind P&H’s decision to acquire the Louis Dreyfus elevator network.
In the 2017-18 crop year, Louis Dreyfus handled an estimated 1.75 million tonnes of grain and oilseeds at its western Canadian locations, primarily spring wheat and canola.
Heimbecker said expanding P&H’s footprint to more locations in the West will reduce weather-related risks, enhance grain origination capabilities and allow the company to participate more aggressively in the global grain market.
It remains to be seen how the LDC deal will impact competition for farmers’ grain.
On a national level, the Canadian grain industry will be losing a major grain buyer. LDC was Canada’s sixth largest grain company with total inland storage capacity in the range of 375,000 tonnes.
On a regional and local level, the number of operational elevator facilities buying producers’ grain is unlikely to change in the short term.
P&H already owns a 52,000 tonne elevator at Tisdale, Sask. The acquisition of LDC’s 41,000 tonne facility at Tisdale would give the company two facilities at the northeastern Saskatchewan community, one served by each of Canada’s two major railway companies.
Heimbecker said it’s too early to say if P&H will consider liquidating assets if the LDC deal goes through.
James Nolan, an agricultural economist at the University of Saskatchewan, said grain industry observers including himself have been anticipating consolidation in in the Canadian grain industry for some time.
While the LDC acquisition is likely to make P&H a more competitive and sustainable player in the Canadian grain industry, the loss of LDC puts Western Canada one step closer to an industry that’s controlled by a handful of large powerful companies.
“I think P&H has always been committed to remaining in Western Canada and I think (with LDC) they’ve managed to make a pretty good acquisition for themselves,” Nolan said.
“In in the short term, I don’t think it’s going to do anything, in terms of how farmers are affected, but in the longer term, it signals a much larger process that will occur … of mergers and acquisitions in this particular industry.”
“My fear is that we’re eventually going to come down to … (two) or three major firms in Canadian grain handling and if that happens, it creates all kinds of issues around supply chains and market power and potentially negative impacts for farmers.”
Brant Randles, president of LDC Canada, said his company remains committed to serving the Canadian market.
LDC’s grains and oilseeds terminal in Port Cartier, Que., remains an important asset, as does its canola crushing and refining plant in Yorkton, Sask., which processes more than one million tonnes of canola annually.
LDC has invested more than $65 million into its Yorkton crush plant over the past few years.