CALGARY – Henry Gutting, a farmer and United Grain Growers delegate from Wilke, Sask., went to last week’s UGG annual meeting with a troubling question on his mind.
What are the chances, he asked, that American corporate giant Archer Daniels Midland will expand its 45 percent share in the prairie grain company to take it over?
Will UGG, the original prairie grain company, disappear?
President Ted Allen was ready.
“The bottom line is that it is always a possibility,” he said.
But it is unlikely. “They don’t have a history in this regard of wanting to have it all.”
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Later, Martin Andreas, senior vice-president of Decatur, Ill.-based ADM, insisted a takeover is not an issue or a goal.
“The way our arrangement is set up, the chances of that are zero,” he told reporters after a speech to the UGG meeting. “We don’t even have an interest in that. They know how to run their business better than we do.”
The arrangement Andreas mentioned was the $81 million (U.S.) ADM investment which bought it 45 percent of UGG, two seats on its board of directors and a veto over recommendations from the powerful grain operations committee of UGG.
He said the investment was made to give ADM access to the grain gathering facilities of UGG and to the prairie-produced products various ADM processing plants need.
“To us, UGG is the strongest element in Canada,” Andreas said after his speech. “We like to think we are the strongest element in the U.S. Put the two strongest entities together, we should be able to compete very well and grow the market.”
ADM is one of the world’s largest food companies with processing facilities around the world, a transportation fleet that includes 2,100 barges and 16,000 rail cars, and projected profits this year of more than half a billion dollars (U.S.)
The UGG investment of $81 million was small potatoes for this giant.
Last year, it invested more than $1.5 billion worldwide and along the way became the world’s largest processor of cocoa beans. When the year started, ADM was not in the cocoa business.
Its 42 flour mills worldwide process 25,500 tonnes of wheat each day.
All or nothing
UGG officials told delegates last week that the agreement between ADM and the company prohibits it from a “creeping takeover” through small increases in share purchases.
If ADM wants to increase its share of the company, it would have to make a bid for all shares.
And UGG president Allen said that is not going to happen.
“It’s not ADM’s style of dealing,” he said in an interview. “I think there would be a downside if they did. What would drive it? I don’t see what would drive it.”
