Viterra purchase gets go-ahead | The company still has foreign regulations to iron out
Glencore International’s proposed $6.1 billion takeover of Canada’s largest grain company is a step closer to reality.
However, the transaction is unlikely to be completed before the beginning of the new crop year as Glencore officials had previously suggested.
Glencore officials confirmed July 15 that their plan to acquire Viterra has received approval from Industry Canada.
Industry minister Christian Paradis approved the deal July 15, saying it is likely to be a net benefit to Canada.
“I have approved Glencore’s application under the Investment Canada Act to acquire control of Viterra,” Paradis said in a news release.
Read Also
Canola council cuts field agronomy team
The Canola Council of Canada is cutting its agronomy team as part of a “refreshed strategic framework.”
“Glencore has made a number of commitments to Canada …. The approval of this transaction demonstrates that our investment policies are working, helping to create jobs, growth and long-term prosperity.”
With Industry Canada approval now in hand, the Glencore deal has just a few regulatory hurdles remaining before it can be closed.
Among them are approvals from China’s ministry of commerce (MOFCOM), New Zealand’s Overseas Investment Office and Australia’s Foreign Investment Review Board.
Viterra officials confirmed that MOFCOM continues to review the deal and that the Chinese review process has moved to the next phase of assessment. However, the MOFCOM process is expected to continue into August, meaning the deal won’t be closed before the beginning of the 2012-13 crop year.
Glencore continues to communicate with MOFCOM to ensure approval of the deal as soon as possible, the company said.
Chris Mahoney, director of agricultural products with Glencore, said approval of the deal will result in more investment and continued growth of Western Canada’s agriculture industry.
As part of the deal, the Swiss company has promised:
- to maintain Viterra’s head office in Regina and make it the headquarters for Glencore’s North American operations
- to increase Viterra’s projected capital expenditures in Canada by more than $100 million over five years
- to invest an additional $8 million in research and development initiatives, over and above Viterra’s projected expenditures
- to contribute toward unspecified grain industry initiatives in Manitoba
- to increase contributions by 25 percent toward programs that support the western Canadian farm community
- to make charitable contributions in support of youth and to provide scholarships to First Nations and Métis students
- to work with the Saskatchewan government to develop a Global Institute for Food Security and contribute to the project should the province initiate it.
Saskatchewan’s 2012-13 provincial budget included $250,000 to establish a global food security institute.
If it goes ahead, the institute would be located at the University of Saskatchewan in Saskatoon.
“Glencore is committed to investing in Viterra’s operations, its philanthropic initiatives and in playing a key part in ensuring the continued growth of western Canada’s agricultural industry,” Mahoney said.
In Regina, Liberal MP and former federal agriculture minister Ralph Goodale said Glencore’s commitments to the Canadian grain industry look good on paper.
However, he questioned whether Ottawa had mechanisms in place to ensure those promises are fulfilled.
“All of (what Glencore has promised) is attractive, but what’s the guarantee that it’s actually going to be delivered?” said Goodale. “It’s relatively easy for a company to make commitments and promises at the time a transaction is being assessed … (but) then what happens?”
Goodale said Industry Canada’s approval of the Glencore deal highlights several shortcomings in Canada’s foreign investment rules.
He suggested Ottawa should introduce enforcement mechanisms such as monetary bonds to ensure companies deliver on their promises.
He also said Canadians deserve more clarity on what constitutes a “net benefit” to Canada.
Industry Canada will not approve a foreign takeover unless it is likely to be a net benefit to Canada.
“What is the government’s definition of net benefit?” Goodale said.
“The definition of net benefit is entirely undefined.”
