The largest shareholder in Agricore United wants a bigger piece of the newly formed company, but only if that’s OK with everybody else.
World grain giant Archer Daniels Midland told delegates attending Agricore United’s first annual meeting that it would be happy to increase its 19 percent holding in the company formed by the merger of Agricore and United Grain Growers.
“We’d love to invest more with Agricore United in the grain origination and throughput systems that will complement our ability to do business around the world with our customers,” said ADM chair Allen Andreas.
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The money is there for the taking, but only if the board of directors of Agricore United wants it, said the head of one of the world’s largest grain companies.
Andreas was cautious not to step on any toes at the meeting, going so far as to tell reporters that the amount of money ADM invests in the Canadian company is out of its hands.
“It’s really Agricore United’s judgment as to what they feel is the appropriate need for capital in their business structure.”
Agricore United chief executive officer Brian Hayward said the American partner is understating its role in the investment decision process because it doesn’t want to rock the boat.
“Even though they’ve got an invitation to do something and they have the legal right, they want to make sure that the welcome mat is still there.”
The welcome mat Hayward is referring to is a deal that allows ADM to increase its share in Agricore United to 25 percent from 19 percent within 20 business days of the merger, which was concluded Nov. 1.
Andreas made it clear that ADM is keen on increasing ownership if Agricore United wants to issue additional shares within that time frame. Hayward wouldn’t say whether that will happen.
The new arrangement also allows ADM to buy up to 45 percent of Agricore United through new share offerings during the first three years. The ownership position will be capped at 45 percent unless ADM makes an offer to buy the whole company.
Andreas said he is working with Agricore United to determine the proper level of investment in the Canadian company. The two parties have agreed that ADM won’t become a majority shareholder.
“We really value the relationship a lot more than the percentage. The reason we came up with the 45 percent originally was that there was some concern about our ambitions to control the business,” said Andreas.
He said ADM’s interest in Canada stems from the amount of arable land that exists here. Analysts say the company wants to secure a potential source of grain for its North American mills.
World population is increasing at a rate of 87 million people per year and Canada’s grain production could play an “increasingly important role” in meeting the nutritional requirements of that expanding population, said Andreas.
ADM has been increasing its investment in Canadian canola processing plants and wheat flour mills and felt that hooking up with a Canadian grain company made sense.
So how does Agricore United benefit from the relationship?
Andreas said the alliance with ADM gives the new company access to a worldwide network of assets that includes:
- 429 grain elevators.
- 33 oilseed crushing plants.
- 30 cooking oil refineries.
- 51 wheat flour mills.
- 16,300 rail cars.
- 2,180 barges.
- 650 trucks.
“We have investments in businesses in every continent with the exception of Antarctica.”
