Two prairie wheat pools increased their stake in United Grain Growers Ltd. last week, prompting more speculation about the fate of the 91-year-old grain company.
At the same time, UGG’s board of directors adopted new rules designed to provide for “fair treatment” of all shareholders in the event of an unsolicited takeover bid.
Alberta Wheat Pool and Manitoba Pool Elevators bought another 255,500 of UGG’s limited voting common shares last week. That boosts their joint holdings to 1,872,200 shares, representing 14.98 percent of the issued and outstanding shares in UGG. So far the companies have spent about $20 million buying UGG shares.
Read Also
Stacking Canada up on gene editing livestock
Canada may want to gauge how Argentina and other countries have approached gene editing in livestock and what that has meant for local innovation.
Under UGG’s new “shareholders right plan” any party wishing to acquire more than 15 percent of UGG’s shares must make an offer to all of the company’s shareholders. The plan is designed in part to prevent a so-called creeping takeover bid, whereby a party gradually increases its shares until it has effective control.
Company president Ted Allen said in a press release the company was concerned that the accumulation of a large block of shares by a single party without a general offer being made to all shareholders was unfair and could prevent the board from pursuing alternatives that might mean greater returns for shareholders.
An Alberta Pool official said last week it was too early to comment on the impact the new rules have on the pools’ investment plans.
Meanwhile, the pools’ statement that their investment in UGG is designed to thwart a possible takeover bid by a foreign-based multinational grain company was being met with skepticism in grain industry circles.
“I think their rationale is bogus,” said University of Manitoba agricultural economist Daryl Kraft, who added the pools wouldn’t be investing in another grain handling company, especially one with as spotty financial history as UGG, just to acquire and hold on to the assets.
“They’re interested in controlling the company,” he said.
One former senior executive with a prairie pool also doubts the pools’ public explanation.
“I assume they have a game plan that goes beyond just blocking someone,” said the former executive, who spoke on condition of anonymity. He added he doesn’t think the two pools have the financial resources to pursue a full takeover bid.
“If there is a larger objective it seems to me they’d have to have a partner or partners with them in order to make that happen,” he said.
He raised the question of whether Saskatchewan Wheat Pool, the largest of the three prairie pools, might get involved, either by joining with the two other pools or coming in on its own to take control of UGG and thus gain access to a prairie-wide grain handling network.
Sask Pool chief executive officer Don Loewen said Feb. 6 his company does not own any UGG shares but didn’t rule out future investment.
Dick Dawson, a former senior executive with Cargill Ltd. and now a consultant in Winnipeg, thinks the Manitoba and Alberta pools’ interests in UGG reflects a desire to retain a prairie-wide co-operative voice.
“As Saskatchewan Wheat Pool moves on structurally, culturally and financially into looking and sounding and behaving more like large private company each day … that leaves a huge void,” he said. “I think this is a play to close that gap.”
CWB discourages foreign owners
There are also different views as to whether a foreign-owned multinational would be interested in acquiring UGG. Not as long as the Canadian Wheat Board is in place, say some, noting that companies like ConAgra and Archer Daniels Midland want to retain full control of the grain they buy.
The continued interest in UGG supported the company’s share price, which closed last week at a healthy $12.50.
