The new owners of the CWB say they plan to build the former government owned grain marketer into a nation wide enterprise.
Karl Gerrand, chief executive officer of Global Grain Group, also known as G3, said at an April 15 news conference that G3 plans to expand the CWB’s reach.
“In the coming weeks, G3 is committed to explore potential opportunities within Canada’s agricultural commodity value chain, from grain purchasing to storage to rail transportation and international shipping.”
G3 is buying a 50.1 percent controlling stake in CWB for the equivalent of $250 million, which includes eastern Bunge assets and money to pay down CWB’s debt.
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The remaining 49.9 percent, which represents the $249 million total asset value of CWB, will be rolled into a farmers’ trust. It will be given to farmers as they deliver grain to the CWB, including equity for farmers who have delivered against the CWB’s farmer equity plan since 2013.
G3 has the option to buy out the trust share in seven years time at fair market value but is not required to do so.
G3 is a joint venture of global grain giant Bunge and the Saudi Arabian overseas investment fund Saudi Agricultural and Livestock Investment Company. Bunge will own the majority stake in the new Canadian-based firm.
G3 is not buying the equity of the existing CWB. Instead, it is contributing assets and money to double the size of CWB.
Bunge’s export grain terminal in Quebec City is being rolled into the new CWB, as are a handful of eastern grain elevators. Some of the G3 investment will be money to pay down debts accrued by CWB as it bought and built grain-handling assets such as Mission Terminal, an export terminal at Trois Rivieres, Que., inland grain terminals and new elevators.
The privatization should be completed during the summer and has already received the approval of Industry Canada.
It brings to a close a major chapter in the Conservative government’s agriculture policy agenda, and agriculture minister Gerry Ritz was in a celebratory mood at the official announcement.
“With this deal, our government has fully delivered on the commitments we made during the marketing freedom legislation,” said Ritz, flanked by representatives of CWB and G3.
“The bottom line for farmers is that a strong, voluntary CWB needs another viable, competitive bidder (to be brought into Canada’s grain business as owner). With another strong bidder, Canadian farmers will be better able to capture these exciting opportunities.”
CWB president Ian White said bringing in a capital-rich, global grain giant fulfilled everything CWB believed it needed to create a viable new alternative to Canada’s present grain companies.
The biggest strategic weakness for the new CWB is its lack of west coast export facilities.
“We see possibilities and potential for development on the West Coast,” said Gerrand.
The farmers’ trust will distribute its 49.9 percent of CWB equity to farmers at the rate of $5 per tonne of grain delivered, as has been the case since the farmer equity plan was unveiled in 2013.
The federal government will not recoup the $300 million it spent when the CWB monopoly was dissolved. Repayment would have threatened the new CWB’s survival.
Dayna Spiring, CWB’s strategy officer and the overseer of the privatization process, highlighted the ability of farmers to earn equity in the farmers’ trust as a way to obtain ownership in the Canadian grain industry.
“Up until today, farmers had no ownership interest in the CWB. It was farmer controlled. It was never farmer owned.”
Spiring said the seven-year buyout option in the G3 deal does not make a buyout inevitable but was a commercial consideration that every potential buyer the CWB spoke with demanded as part of a final deal.
Any gains in CWB’s value will be reflected in the value of the farmer-owned units in the trust, she said.
CWB plans to continue to offer pooling as a marketing choice for its farmer-customers.
“We still believe that there’s a place for pooling, as many farmers continue to want to pool their grain,” said White.
G3 intends to move into CWB’s headquarters in Winnipeg.
