The creation of Canada’s new and largest grain handling company hinges on the decision of a federal agency investigating the merger of United Grain Growers and Agricore.
Agricore United would have gross revenues of nearly $4 billion, almost $1.8 billion in assets and would control 27 percent of the primary elevator storage on the Prairies.
Farm groups are concerned about the reduction of competition in the grain industry that would result from the merger.
That’s where the Competition Bureau comes in. The agency is investigating the deal to see if it contravenes any of the rules of fair play.
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The merger is also subject to an Aug. 30 vote in which two-thirds of Agricore’s 96 delegates and 84,000 Class B and C shareholders must approve the deal.
Industry analysts don’t expect either to be a stumbling block.
“I’d be shocked if it wasn’t allowed to go through either by the delegates or the Competition Bureau,” said David Schroeder, a grain industry analyst with Dominion Bond Rating Service. “If either of those groups blocked it, it would be because of pure ignorance of what’s going on in the industry right now.”
Schroeder said there is so much competition in the Canadian grain industry that nobody is making money.
David Ouellet, the Competition Bureau official in charge of the file, said the key is to determine if the merged entity would be in a position to affect prices and fees in a particular market.
The first step is to determine what a relevant geographic market is. The investigation will also determine whether the merger constitutes a barrier to entry for other firms, if there are effective substitutes for competition such as the ability to load producer cars, and whether one of the merged firms was leaving the market anyway.
If the bureau has a problem with some aspect of the merger, it may recommend the new company sell certain parts of its business rather than a wholesale block of the deal.
Ouellet said the bureau likes to respect the closing dates for mergers, which in this case is Nov. 1.
