The two prairie pools bidding to take over United Grain Growers Ltd. seem to believe farmers are
“ignorant hicks,” says Ted Allen.
Their offer to buy all UGG shares for $13.75, and their warning that farmers might be squeezed out of the company by institutional investors, insult farmers’ intelligence, said the UGG president.
And he doesn’t think his farmer members will fall for it.
“We don’t believe farmers will put a small gain on their investment in UGG ahead of their long-term interests as businesspeople and their ability to find competitive sources for their farm service needs,” Allen said last week.
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Alberta Wheat Pool chief financial officer Geoff Southwood later described Allen’s comments as “very regrettable.
“I can only tell you that we have intense respect for farmers, individual members and the delegates who represent them,” he said March 3.
Southwood said institutional shareholders have indicated they will tender their shares for the $13.75 offer and added he expects farmers will show “the same degree of responsibility towards their balance sheets.”
During a conference call with reporters from across the country last week, a combative Allen told farmers not to be “railroaded” into selling out their company for the pools’ “lowball” bid.
“We have a long way to go before this is finished,” Allen said. “There is no need (for farmers) to be pushed into a decision.”
The UGG president unleashed a torrent of invective at Manitoba Pool Elevators and Alberta Wheat Pool over their hostile takeover bid for the 91-year-old grain company.
Repeatedly referring to the two companies as the “junior pools” he accused them of engaging in “scare tactics”, of demeaning farmers’ intelligence and of being condescending and paternalistic toward UGG’s farmer members and shareholders.
He described the buy-out bid as “adventurism” and said the pools are putting the financial health of their own organizations and members at risk by borrowing heavily to finance the $172 million purchase.
He labeled the takeover bid as a “sneak attack” on UGG and accused the pools of engaging in “abusive and coercive” tactics, misrepresenting their intentions and misleading investors and perhaps violating securities regulations.
While the pools’ purchase offer is open until March 27, they have publicly appealed to UGG’s farmer members to sell their shares quickly in order to send a message to UGG’s board of directors and to other investors that they support the takeover.
UGG’s board has described the offer as totally inadequate but has yet to issue a formal recommendation to shareholders on how to
respond.
Allen declined to say what he thought a fair price for UGG’s shares would be. At the close of trading March 3 it was $14.
He also declined to comment on an analysis from the financial firm Scotia Capital Markets projecting a share price of $18.50, based on a competing takeover bid coming in at $17. UGG says it knows of no competing bids in the works.
The pools have warned that if the poison pill provision of UGG’s shareholder rights plan is triggered, releasing a huge volume of cheap shares onto the market which the pools would be prohibited from buying, institutional investors will snap up most of the new shares, thus reducing farmer control over UGG.
Allen rejected that argument, saying there is no reason to believe farmers won’t take up a good number of those additional shares.
The fate of the poison pill is now in the hands of the courts, which will hear arguments on the legality of the plan in Winnipeg March 11-12.
Allen also warned about the implications for farm policy debate in the Prairies if the pools take over UGG and silence its traditional right-wing perspective.
The result, he said, will be more “Stalinist uniformity”, particularly in Saskatchewan.
