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Competition Bureau clears Puratone, Big Sky takeovers

Canada’s Competition Bureau has approved two mergers in the domestic hog industry, where producers are struggling to cope with heavy losses caused by higher feed prices.

The bureau said Monday it would let Toronto food firm Maple Leaf Foods buy hog producer Puratone Corp. for $42 million as well as allow Quebec meat packer Olymel to buy Big Sky Farms, Canada’s second-largest hog producer, out of receivership for $65.25 million.

"In both investigations, the bureau concluded that the mergers were unlikely to lead to a substantial lessening or prevention of competition," it said in a statement.

The bureau said it considered whether Olymel or Maple Leaf would be able to "totally or partially foreclose rivals’ access to live hogs in upstream markets… or to limit or cease their purchases of live hogs from upstream rivals."

The bureau said it concluded the buyers would be unable to create or boost market power upstream due to "excess demand" for hogs, and they couldn’t create or increase market power downstream for reasons including "effective remaining competition" — not the least of which would be between Olymel and Maple Leaf.

The bureau did find the two companies may be in a position to hinder other hog producers’ access to buyers, but added that neither Olymel nor Maple Leaf would have any incentive to foreclose rival hog farmers from access to their slaughter plants.

The costs of limiting their procurement of hogs from upstream rivals "would likely exceed the gains from doing so, thereby rendering such a strategy unprofitable," the bureau said.

Olymel owns a hog slaughter plant at Red Deer, Alta., while Maple Leaf has a major hog slaughter plant at Brandon, Man. and a plant at Lethbridge, Alta. producing specialty pork cuts for the Japanese market.

Soaring grain costs caused by a severe U.S. drought mean North American hog farmers are losing as much as $50 for every pig they raise, forcing some to exit the industry. Packers are concerned about finding enough pigs to slaughter.

Canada is the world’s third-largest pork exporter.

Manitoba-based Puratone raises 500,000 hogs annually in that province. It entered court protection from creditors in September and got an offer from Maple Leaf on Nov. 1.

Big Sky, which produces about a million pigs per year in Saskatchewan and Manitoba, entered receivership in early September and reached its deal with Olymel the following month. — Reuters/AGCanada.com Network

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