An independent analysis of Glencore’s proposed acquisition of Viterra has raised many of the same concerns about the deal voiced by farmers.
Glencore intends to sell 232 agri-retail outlets to Agrium once its purchase of Viterra is approved.
Some farm organizations and individual farmers have said they worry about what might happen when a company that manufactures fertilizer becomes the largest retailer.
Informa Economics, hired by the Saskatchewan government to help it weigh the net benefit of the deal to the province, said it is concerned about Agrium’s ability to put pressure on nitrogen prices, although there is no evidence to suggest that will happen.
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Agriculture minister Bob Bjornerud, who released the report May 11, said farmers have the same worries.
“Any time there’s a possibility of losing a little bit of the competition that we already have I know they are concerned,” he told reporters.
“I’ve had that brought to my attention a number of times in the last couple of weeks.”
The number of retail outlets overall won’t change.
“What will change in a material way is the degree of vertical integration in the crop nutrients sector if Agrium adds the largest retail input sales network to its existing production facilities and the minority interest it is acquiring in Canadian Fertilizer Ltd.,” said the report.
Viterra’s share of Saskatchewan retail facilities was 37 percent. After the deal, Agrium would have 42 percent.
At the wholesale level, Agrium would own 53 percent of Canadian ammonia capacity and 49 percent of urea production capacity.
The federal Competition Bureau does more detailed investigations when a single company has a market share of greater than 35 percent.
The report said the bureau’s prime consideration in assessing the deal should be the impact on price and output.
“It is a firm’s ability to raise prices, not the likelihood that prices will be raised, that is of concern,” said the report.
Informa found no negative impact to competition from Glencore’s plan to sell 19 elevators and port facilities to Richardson.
Bjornerud said the report would form part of the province’s submission to Investment Canada, which is looking at the deal under foreign ownership rules.
The report listed several positive aspects of the $6.1 billion takeover. They include Glencore’s marketing ability around the world, its plan to make Regina the head office of North American agricultural operations and the company’s pledge to maintain existing Viterra commitments to research.
“Glencore plans to increase capital expenditures by $100 million over and above Viterra’s projections for the next five years,” Informa said.
Bjornerud said the government would ask the federal government to put conditions in place to hold Glencore to such commitments.
The report also noted that Glencore expects it could transfer between 20 and 30 positions from Viterra’s Calgary office back to Regina within a year. A handful of European jobs could also move to the city.
Glencore welcomed the analysis, saying it was pleased the benefits to farmers were underscored.
