Sitting at the end of the board of directors’ table at last week’s Agricore United annual shareholders meeting were two giants of the world food processing industry.
After the shareholders meeting wrapped up, Archer Daniels Midland Company chair and chief executive G. Allen Andreas and ADM president Paul Mullhollem, who were both appointed to the board of directors during the meeting, didn’t leave town. They stayed in the room, moved to chairs at the back, and listened to farmers debate policy and company issues during the next day and a half of the farmer-members meeting.
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ADM owns almost 20 percent of AU, and holds convertible debentures that it could exercise to take that ownership position up to 25 percent. But one quarter of AU is chump change in the pocket of ADM, a huge multinational food processor with operations in 60 countries. So why did Andreas and Mullhollem spend two frigid days in Winnipeg, listening to company officials and farmers?
“This is a very important investment for us,” said Andreas in an interview.
“It is a critical, integrated part of our overall business. So for us to participate with the farmers here is an important part of our business.”
Officials at AU say their company’s “strategic alliance” with ADM is key to its potential. Although ADM owns only 20 percent of the company, has only two of 15 seats on the board of directors, and does not control the company, AU chief executive officer Brian Hayward said ADM’s influence will be profound.
Having Andreas and Mullhollem on the board of directors will tie AU into the centre of the global food business.
“The benefit is huge. It keeps you from making mistakes and makes sure you’re aligned to where the market’s headed,” said Hayward in an interview after the meeting.
ADM is the biggest flour miller in Canada, operates canola crushing plants, and owns port facilities and other parts of the food chain. By bringing AU into the chain, all links benefit from being able to better organize the flow of grain and products, Hayward said.
But that chain is not welded solid. AU can do business with ADM’s competitors and ADM does not have to always use AU to source its raw materials.
“We look to each other as first choices,” said Hayward.
“If they can buy product from someone else more cheaply, that’s good. If we can sell to somebody else and achieve a higher price, then we have the freedom and flexibility to do that.”
Hayward said ADM officials have not interfered with AU management.
Andreas said connections like these are helping his company expand.
“We’re doing about 100 million tonnes of grain business across the world, and so in the course of those activities we’re originating a lot of both products and crops from Canada as an important part of our global perspective on where we’re headed.”
ADM hasn’t been making money from the shares it bought originally in United Grain Growers for $16 each. Common shares of AU are now trading at about $5.
But Andreas said ADM plans to stay around for the long haul.
“We’re investors. Our company is an investor in Agricore United not strictly as a method of improving the value of our (shares),” said Andreas.
