Farmers of North America (FNA) didn’t get the chance to turn CWB into a farmer-owned company, but it’s still willing to work with the new owners, officials said last week.
James Mann, president of the Saskatoon-based FNA, said under its proposal farmers would have owned 100 per cent of the company, as opposed to the 49.9 per cent equity in G3.
“The FNA offer would have given farmers a total equity position in the CWB of $600 million,” Mann said in a news release April 20. The G3 sale gives farmers a potential stake in CWB, but not control. G3 can buy farmers’ equity after seven years, whether farmers want to sell or not.
“We’re very disappointed that the farmer bid (as proposed by FNA) was dismissed (last fall),” Bob Friesen, FNA’s vice-president of government relations, said in an interview April 23.
However, FNA still wants to work with CWB to benefit farmers, he said.
FNA, a private Saskatoon-based company in the business of getting farmers better deals on crop inputs and other products, is working to create a majority farmer-owned, limited partnership company to manufacture nitrogen, ProjectN and another to distribute it, Genesis Grain and Fertilizer.
“We’ve always said it is a much more efficient use of farmers’ capital if you build fertilizer distribution and grain-handling facilities on the same site,” Friesen said.
The best way for farmers to boost their returns is to own more of the value chain, he said. If farmers owned their own grain company they would get the true value of their grain through either a narrower basis (difference between the country and port price) or higher company profits because of the wide basis, Friesen said.
FNA says 10 questions should be considered when assessing the G3 purchase of CWB for $250 million announced April 15, including:
- Will the deal earn equal or better margins for farmers than majority farmer ownership?
- Will farmers get timely returns from their equity?
- Will farmer equity be diluted?
- If competition is a key, are there measure to block mergers and acquisitions reducing competition?
- Will CWB work with farmer interests to achieve synergies where possible?
CWB didn’t respond to a request for comment.
However, Dayna Spiring, CWB’s chief strategy officer and chief counsel told reporters April 15 CWB sought an investor with grain-handling experience and lots of capital to expand CWB’s grain-handling network.
She said it was also important to bring in new investment for two reasons. One was to add more competition. “And secondly, we wanted to give our employees every opportunity to continue to work for and grow with CWB,” Spiring said. G3 has just 12 staff.
G3, a joint venture firm majority owned by multinational, publicly traded Bunge, the world’s third-largest grain and food company and state-owned Saudi Agricultural Livestock Investment Company (SALIC), met the criteria.
Friesen said people with grain-handling expertise can be hired. FNA had also been negotiating with an investor “with very deep pockets,” when its CWB bid was rejected, he added.
Whether FNA would have raised $600 million from farmers to buy CWB is unknown because the deal was rejected by CWB and the federal government before it had finished its fundraising efforts. Farmers pledged $50 million towards the venture in a very short period last fall when they were busy harvesting, Friesen noted. What still troubles Friesen is why FNA had to submit its bid by Oct. 20, 2014 while others had more time.
CWB was created after Ottawa ended the Canadian Wheat Board’s 69-year-old monopoly on the sale of western Canadian wheat and barley Aug. 1, 2012.
FNA’s plan was for a commercial enterprise, Friesen stressed.
“It is really, really unfortunate if there’s anybody in the industry or in governments that would discourage farmers from owning more of the value chain… because we know that for farmers to accrue the benefits… they need to own part of the value added.”
Friends of the Canadian Wheat Board chair Stewart Wells suspects the federal government was determined to prevent farmers from owning CWB so it can never be a platform for restoring the monopoly. Wells also said preserving CWB jobs shouldn’t have been a criteria when searching for investors.
“That’s not how you do a business deal,” Wells said, noting the objective when selling a company is getting the best deal for the shareholder.