Newly created buyer G3 to take majority ownership of government-owned CWB

Farmers can earn equity in CWB by delivering grain but it won’t be farmer controlled

When the Canadian Wheat Board had a monopoly to market western wheat and barley, grain farmers controlled its operation. But they didn’t own it.

Now farmers who deliver grain to CWB can collectively own up to 49.9 per cent through a farmers’ trust, but they will have no control and little input. Control is with G3 Global Grain Group, which is buying 50.1 per cent of government-owned CWB for $250.5 million.

Agriculture Minister Gerry Ritz announced the sale in Winnipeg April 15.

G3, newly formed for the deal, 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).

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G3’s money will stay with CWB instead of going to the seller. When combined with the farmers’ equity allocated at a rate of $5 for every tonne of grain delivered retroactive to Aug. 1, 2103, CWB has a book value of $500 million.

“This is a win for Canadian farmers,” Ritz said. “The Canadian Wheat Board will be a private company fully off the government’s books.”

The sale has been approved by Industry Canada and is pending by the Competition Bureau, he said. The deal should close by July.

The farmers’ equity has no guaranteed value but costs only patronage. Equity isn’t taxable until paid in cash.

“This transaction ensures farmers will share in the success (of CWB) as they do business with us,” CWB president and chief executive officer Ian White said.

Offering equity is a way to encourage farmers to boost CWB’s marketshare, Ritz said.

G3 chief executive officer Karl Gerrand said the new company will keep the CWB name and pooling.

The former CEO of Can-Oat Milling was raised on a farm near Virden. He also worked for Viterra before becoming Bunge Canada’s managing director. G3’s staff of 12 will join 100 CWB employees working out of two floors leased back from the building it sold in February.

The new CWB will have two shareholders — G3 and the farmers’ equity trust. Farmers who deliver to CWB will own units in the trust and the trust will own CWB shares. CWB will be a private company exempt from making financial reports public.

The trust will be overseen by three independent trustees selected by CWB. One trustee will sit on CWB’s seven-director board.

After the farmers’ equity is fully allocated, or in seven years, G3 can buy the equity, but isn’t obliged to, said Dayna Spiring, CWB’s chief strategy officer and chief counsel.

Norm Hall, president of the Agricultural Producers of Saskatchewan, said farmers should have the option to retain their equity.

Gerrand said he can’t predict if G3 will eventually buy farmers out. “What I can say today is we embrace this equity component and the farmer involvement in our business.”

Allocating the equity could take awhile. CWB has about four per cent of the West’s country elevator space. If it handles four per cent of the system’s average annual 35 million tonnes, allocation will take 36 years.

Equity will be redeemed when a farmer quits, or dies, or if CWB is sold or launches a public share offering, Spiring said. There won’t a minority shareholder discount when shares are liquidated.

Farmers’ equity can be diluted but if so, farmers will own a smaller piece of a bigger company, a CWB official said.

Bunge Canada, through G3, will add one elevator in Ontario and three in Quebec, plus a port terminal in Quebec City.

The new CWB plans “to build a coast-to-coast grain-handling network,” Ritz said.

In the interim CWB will continue to move grain from the country and West Coast ports through handling agreements with other grain companies.

“In addition to that we see possibilities and potential for development on the West Coast all of which we plan to look into,” Spiring said.

CWB, which didn’t own any elevators or port terminals, has been buying and building facilities the last 18 months. It purchased port terminals at Thunder Bay and Trois-Rivières, bought inland Prairie West Terminal and Great Sandhills Terminal and is building four new country elevators, including at Bloom and near Ste. Agathe in Manitoba.

The Harper government ended the wheat board’s 69-year-old monopoly in 2012, fulfilling an election promise.

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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