Maple Leaf Foods’ proposed takeover of Schneider Corp. is worrying prairie hog farmers.
There will then be two rather than three major companies slaughtering hogs on the Prairies if Mitchell’s Gourmet Foods of Saskatoon, owned by Schneider, is absorbed by Maple Leaf Foods.
“We’ve gone from a single desk system to almost a single buyer system,” said Manitoba Pork chair Marcel Hacault.
“It’s just cutting down one more competitor in the West.”
Hacault said Manitoba farmers want the federal competition bureau to examine this deal and stop it if it threatens farmers.
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But industry analysts and Maple Leaf Foods officials say farmers will probably notice little difference if the takeover goes ahead.
Maple Leaf Foods announced the friendly takeover of Schneider Corp. on Sept. 25. It will pay American hog slaughter giant Smithfield Foods $378 million US, or approximately $515 million Cdn, for the company, which owns mainly non-slaughter meat processing and packaging facilities but also the Mitchell’s slaughter plant in Saskatoon.
Maple Leaf has long coveted the Schneider facilities, since it mainly owns slaughter plants.
In 1998, Maple Leaf launched a hostile takeover bid for Schneider but lost out to Smithfield. It had offered an all-stock bid of $20-$25 per share compared to Maple Leaf’s $29 per share cash offer.
This takeover, which will take months to wend its way through the regulatory process, will make Maple Leaf a much better balanced company, company officials say.
“It was a great fit five years ago and it’s as good or better today,” said Scott McCain, president and chief operating officer of Maple Leaf Foods’ agribusiness group.
“If anything, our interest has become stronger.”
McCain said Schneider does little slaughtering and few Canadian farmers will notice any difference.
“My message is that it’s business as usual,” said McCain. “I wouldn’t anticipate any major changes at this point.”
Manitoba Agriculture hog market analyst Janet Honey said that’s probably right.
“I don’t think this will have much impact,” said Honey.
“What will make a difference is whether Maple Leaf is making money selling pork. If they’re losing money, it won’t matter who owns which plant.”
University of Missouri hog market analyst Ron Plain said the overall North American industry is scarcely touched because this is part of a shuffling of facilities among packers, not an expansion or contraction of packer capacity.
“This proposed sale of Schneider neither adds nor reduces kill capacity in Canada,” said Plain.
“From a producer’s perspective, what’s really important is the number of hog slaughter plants you have close to you to bid for the hogs in your area. Nothing about this ownership bid is going to change that.”
But hog marketers are concerned about the situation.
“Their commitment is ‘it’s business as usual – all contracts will be honoured,’ ” said Don Hrapchak, manager of Saskatchewan SPI Marketing, who has spoken to both Maple Leaf and Schneider officials since the deal was announced.
“That’s good as far as it goes, but a year, two years from now (when present contracts expire) who knows? We just know that there’s going to be less competition.”
Hrapchak said Sask-atchewan pig producers already face little competition for their pigs because both the Maple Leaf plant in Brandon and the Olymel plant in Red Deer are at capacity and do little to lure pigs away from the Mitchell’s plant.
“For all intents and purposes we’ve got more pigs than packer capacity on the Prairies,” said Hrapchak.
Manitoba Pork’s Hacault said his province’s farmers want prairie producers to work together to protect their interests, but aren’t sure how to do it.
“They’re really concerned about our lack of clout in negotiating,” said Hacault.
“We’re supposed to be partners in this value chain, but a lot of farmers don’t think that’s so.”
