G3 Canada’s farmer equity plan

The trustees act in the best interest of the farmers’ trust created Aug. 1, 2013 by then CWB


G3 Canada’s farmer equity plan

Three trustees have been appointed to oversee farmers’ equity in G3 Canada Limited, the grain company created in July when CWB, the federal government’s grain company, and G3 Global Grain Group, joined forces.

The trustees are Kevin Augusta, a former director of commercial banking with CIBC, David Carefoot chief financial officer at Princess Auto Ltd. and Kim McConnell founder and former CEO of AdFarm.

CWB consisted of the assets of the Canadian Wheat Board after the government ended its monopoly on the sale of western wheat and barley destined for export or domestic human consumption Aug. 1, 2012.

G3 Global Grain Group is 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).

G3 Global Grain Group ostensibly bought CWB for $250.5 million. However, the newly formed company kept the money instead of paying CWB’s owner — the Canadian government.

While the transaction raised eyebrows among some executives with Canadian grain companies and it was criticized by several farm groups as a giveaway of farmers’ assets, CWB officials countered that it made for a financially stronger new company and competitor in the Canadian grain sector.

Starting with the 2013-14 crop year, CWB began giving farmers $5 worth of equity in CWB for every tonne of grain they delivered. The Farmer Equity Plan continues with G3 Canada. It allows farmers to share in G3 Canada’s future growth, although like all equity, there’s no guarantee about how much it will be worth when converted to cash. However, according to G3 Canada’s website there’s no risk to farmers because they get the equity for free.

Farmers who delivered grain to CWB and now G3, don’t get shares in the company directly but rather receive trust units. The farmers’ equity trust, overseen by the three trustees, owns 499,900 Class B shares in G3 Canada. That’s 49.9 per cent of the new company, which is 50.1 per cent owned by G3 Global Grain Group (Bunge and SALIC).

One reason for structuring the company this way is to keep it private rather than publicly traded. Public companies are required by law to disclose their financial statements, giving competitors access to potentially sensitive commercial information.

The trustees will oversee the trust until all the shares have been allocated or the trust shares are sold.

“The value of these shares and this equity position reflects the adjusted closing amount of G3 Global Grain Group’s investment on July 31, 2015,” the trustees said in an email last week. “The trust also received $10 million (pre-tax) to be used for operations over the lifetime of its existence.”

The share units in the equity trust cannot be sold until all the shares have been allocated or for seven years, which is when G3 has the right to buy them all.

Carefoot will represent the trust on G3 Canada’s board. Augusta will chair trustee meetings.

G3 Canada CEO Karl Gerrand has been appointed to serve as an advisory trustee, a role without voting privileges.

Trustees’ expenses related to their duties will be covered and they will be compensated for their work, McConnell said in an email.

A website is being set up to communicate with farmers who own equity units in the trust.

Augusta had a 38-year banking career and played a lead role in banking with many of Canada’s major grain companies. He is a past president of the Manitoba Club and active in the Winnipeg community.

Carefoot, a government-appointed Canadian Wheat Board director from May 2008 to July 2015, is a chartered professional accountant and a chartered business valuator. He has held chief financial officer and other senior leadership positions with Agricore United, Viterra and Ducks Unlimited.

McConnell is a director on a number of corporate boards and foundations and the recipient of many national business awards. In 2012 he was inducted into the Canadian Agricultural Hall of Fame.

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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