The pending multibillion-dollar sale of Viterra demonstrates the value of patient capital and private ownership, says Richardson International president Curt Vossen.
Last week publicly traded Viterra, Canada’s largest grain company, announced it was selling to the world’s No. 1 diversified commodities trader, Swiss-based Glencore, for $16.1 billion. But in a move believed aimed at getting government approval, Glencore will sell some of Viterra’s assets to Winnipeg-based Richardson and fertilizer giant Agrium, headquartered in Calgary.
Richardson’s market share will jump to 34 per cent from around 24 currently.
Richardson will buy 19 Viterra elevators, 13 attached retail farm input outlets, Viterra’s smaller 231,000-tonne-capacity “C” terminal at Thunder Bay, one-quarter of Viterra’s 282,830-tonne Cascadia terminal at Vancouver and Can-Oat milling, which includes a wheat mill in Texas and an oat plant in Nebraska.
Calgary-based Agrium will buy 90 per cent of Viterra’s 258 input stores in Canada and all 17 in Australia, along with 34 per cent of Canadian Fertilizers Ltd. for $1.15 billion.
Viterra traces its roots back to the defunct farmer-owned Prairie Pools and United Grain Growers, which once dominated Western Canada’s grain industry. Glencore, which is the dominant global commodities trader, will have roughly 34 per cent of the western Canadian market after the sale — the same as Richardson.
“The beauty of this situation is I don’t have Glencore coming in at twice the size that I already am,” Vossen said in an interview March 21. “They’re going to be the same size. It’s a fair fight.”
Fair, but also challenging, Vossen conceded.
Farmers win because of increased competition, he added.
Suddenly Richardson International will go from No. 2 spot in Canada’s grain sector to tied for No. 1. Not so long ago it was third, behind Agricore United and Saskatchewan Wheat Pool.
Agricore United was created in 2001 when United Grain Growers acquired Agricore. Agricore was founded in 1999 when Alberta Wheat Pool and Manitoba Pool Elevators, created in the 1920s, merged.
SaskPool and Richardson both pursued Agricore United in 2007. Although SaskPool was the victor, Richardson picked up some assets thanks to the Competition Bureau.
Richardson existed long before farmers formed their own companies starting with the Grain Growers Company in 1906, the Prairie Pools in the roaring ’20s or the Canadian Wheat Board.
In fact, the company formed in 1857 is older than Canada itself.
Vossen agrees Richardson’s longevity stems from being a family-owned, private company. The structure allows for a longer-term view.
“With many of these global grain companies, one thing that’s synonymous with them is patient capital, private ownership and quite often family ownership and willingness to ride out the cycles,” he said.
“Maybe once or twice or three times a generation we’re going to hit a down cycle. If you’re a modern, publicly traded company you’re under the magnifying glass every quarter,” he said, noting private companies don’t face that kind of pressure.
“Inevitably this business has its ups and downs. You have to live with the downs and ride the ups and stay relatively even keeled through it all.”
Multinational grain merchandising giants Louis Dreyfus and Cargill have been in business more than 100 years and are private, family-owned firms.
Canadian grain companies Paterson Grain and Parrish and Heimbecker formed in 1908 and 1909, respectively, are as well.
“They won’t get pushed out of business unless they want to be pushed out of business because they’ve got great positioning in Western Canada,” Vossen said.
The Pools, dominated Western Canada’s grain sector both in business and farm policy for most of the 20th century. While many factors contributed to their downfall, their perceived inability to raise capital is often cited as one. That’s why United Grain Growers and SaskPool went public in the 1990s. But publicly traded companies are vulnerable to takeovers.
Being able to originate grain in Canada is why Glencore is buying Viterra, Vossen said.
“They said to themselves, ‘if we don’t integrate back into origination we could get cut off at the knees…’”
Richardson International has no immediate plans to expand into the United States or beyond, Vossen said. The focus is on integrating its new assets.
“We definitely plan to grow our base in Canada,” he said. “If it makes sense growing business outside of Canada we’re also open to that.”
While Glencore is a huge company, Richardson is confident it can compete with it in Canada, Vossen said.
“The advantage isn’t sheer size globally, what’s important is how strong are you in your particular marketplace,” he said. “The key for us… to compete in this market is… a demand-pull for products that we’re originating. We’ve got the infrastructure to bring that stuff right from the farm gate… to a consumption-end customer.”