$7 billion | Louis Dreyfus could acquire further Canadian holdings: economist
One of the main players in Canada’s grain industry may be poised for expansion.
Louis Dreyfus Commodities is embarking on a $7 billion global spending spree.
Serge Schoen, chief executive officer of the privately held grain firm, said in a rare interview with The Financial Times that spending over the next five years will be 40 percent more than the past five years.
“We will be certainly making more acquisitions than we have done in the past,” said Schoen.
Murray Fulton, an agricultural economist at the University of Saskatchewan, thinks some of the money could be spent bolstering the company’s Canadian holdings.
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Louis Dreyfus owns 10 grain elevators, one port terminal and a canola crushing plant in Canada. All of those assets, except for the Quebec port facility, are located in Western Canada.
The company controls six percent of western primary elevator capacity and handles five percent of the crop.
“It would seem that there would be room for growth,” Fulton said.
“To the extent that they have an office here, getting more things underneath that office is often what companies want to do.”
Louis Dreyfus Canada president Brant Randles did not respond to interview requests, but last November he told Reuters the company wouldn’t likely be pursuing mergers and acquisitions under an open market in Canada.
“(Company) valuations are very rich in Western Canada,” he said.
Fulton said there has been plenty of outside interest in Western Canada’s grain handling system and he would be surprised if Louis Dreyfus isn’t at least contemplating expanding its market share.
The problem is there isn’t much left for sale once Glencore’s takeover of Viterra is approved.
“If people want to get into this market, they’re going to probably have to be a bit more creative,” he said.
“If they really want to do it, they find ways.”
That might involve going after some of the region’s pulse crop firms, such as the struggling Alliance Grain Traders Inc. The firm has 12 pulse processing plants in Canada that could easily be converted to handling wheat and barley, said Fulton.
Alliance shares have fallen from more than $34 in February 2010 to below $11 late last week.
“Companies that are struggling are often really good targets for takeovers. That’s very common,” said Fulton.
He doesn’t anticipate Louis Dreyfus building new assets in Western Canada because the region already has plenty of grain handling capacity.
