If James Richardson International succeeds in its bid to take over Agricore United, prairie farmers will lose one of their few windows into the Canadian grain industry.
As a publicly traded company, AU has been required to publish detailed quarterly financial results and to report to shareholders at annual meetings.
Every three months senior officials make themselves available to market analysts and the media to discuss the results and answer questions about their company’s performance and the grain industry generally.
If JRI acquires AU, that will all change. Under JRI’s proposal, the new company will be transformed into a privately held business, as JRI now operates.
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There will be no shares for investors or farmers to buy and sell, no quarterly financial reports and no annual meeting of shareholders.
Agricultural economist Murray Fulton says that’s bad news for farmers and others interested in keeping the grain industry as open as possible.
“That transparency disappears and that’s a negative,” he said.
Having access to financial information made available by publicly traded companies gives outside observers a chance to evaluate the health not only of the individual company, but the industry as a whole.
“It’s always good to have a sense of how the industry is doing and we would lose that to a large degree,” said Fulton.
JRI spokesperson Jean-Marc Ruest said taking the new company private will enable its board and management to take a longer term view in setting strategic direction and operating the business.
“We can justify bidding at the level that we have ($19.25 cash per AU share) when we look at what the new company can do in the longer term 10 or 15 years down the road,” he said.
In a public company, shareholders tend to look for immediate returns on their investment, something Ruest said doesn’t mesh with JRI’s history, management style or plans for the new company.
“With a public company you’re forced to manage to try to get positive results on a quarter by quarter basis and we have a hard time being comfortable with that process,” he said.
“As a private firm, we can manage the business looking at what’s good for it in the long term rather than in response to short-term pressure from investors who don’t have the background and understanding of the industry that the Richardson family has.”
A spokesperson for the National Farmers Union said many farmers have been demanding more openness and accountability from organizations they deal with.
“This would be against the general feeling out there that people want more transparency,” said executive secretary Terry Pugh.
However, he said it probably doesn’t make any difference to farmers’ bottom lines whether a company is publicly traded or privately held, adding the best scenario for producers would be to have farmer-owned grain handling co-operatives.
While there are many small farmer-owned grain shippers, Saskatchewan Wheat Pool and the farmer-run Canadian Wheat Board will be the only major players left in the industry with some public transparency if JRI’s bid succeeds.
JRI has been a family owned private company for 150 years and has always kept its financial results secret. It did release some information when it made its initial bid for AU in February, reporting profits of $23 million in 2006.
Under the terms of its initial bid for AU, JRI was prepared to operate the new entity as a publicly traded company. However, Ruest acknowledged JRI’s preference has always been to stay private.
“It was certainly going to be big shift from the way we had historically done things,” he said.
Meanwhile, Sask Pool last week extended the deadline for its offer for AU from April 25 to May 15. The Pool is offering a combination of cash and shares worth $19.66 per AU share.
AU’s board of directors has recommended that shareholders reject the Pool’s offer and tender their shares to JRI. The Pool has given no indication whether it will top JRI’s bid.
Before the Pool’s initial bid in November, AU shares were trading on the Toronto Stock Exchange for around $8.
Fulton said it’s possible that whoever wins the bidding war may one day regret it.
“We have to be getting very very close to a level at which the valuation is simply too high to make a go of it,” he said.
