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Editorial: Scorecard needed

As the Winnipeg Jets mount what promises to be an exciting playoff run, casual hockey fans find themselves at a disadvantage.

No doubt more than a few tuned in to the first couple of games last week and were surprised to find a member of the famed Stastny clan had joined the ranks of the team just a few weeks earlier, for example.

The end-of-season trade deadline deals are necessary to fill a few holes in the lineup for teams moving on to the playoffs and the Jets were no exception.

In a similar way, large companies frequently find themselves seeking to fill holes in their own lineup. One may be looking for a greater retail presence, for example, and another a better-filled research pipeline or just a stronger power play. It’s this mix-and-match of corporate needs that drive mergers and acquisitions.

Like the playoff teams currently vying for glory in the NHL, companies (and the folks heading them up) want to win. Win market share, win customers and win profits for the business’s owners.

As our Alexis Stockford reports in our April 19 issue of the Manitoba Co-operator, there’s been yet another wave of mergers in the global agriculture sector. It’s been kicked off, numerous financial analysts have noted, by falling margins. The boom of a few years ago has met the reality of the cyclical commodity economy, and suddenly companies are looking for ways to maintain profitability and position themselves for the future.

It’s been in almost every segment of the farm economy you can think of and it’s creating a wave of change in the companies you’ve come to depend on to service your farms.

Fertilizer companies, crop protection producers, life science companies and grain handlers — all have, are, or will be involved in these sort of deals and takeovers and we’re all going to struggle to keep track of it all.

There’s Corteva, formed by the earlier merger of Dow and DuPont, now being spun off as a stand-alone entity. There’s the takeover of Syngenta by ChemChina last year, which has so far seen the company (created just a few years earlier through the merger of Novartis and Zeneca) keep its name. Meantime Bayer is putting the final touches on its own deal that will see it wholly acquire that most controversial of companies, Monsanto.

In the fertilizer business, we’ve seen Agrium and PotashCorp disappear, replaced by Nutrien. That followed the 2016 acquisition by Mosaic of Vale’s fertilizer unit, positioning it for future growth in the fast-growing Latin American region.

In the global grain sector, ADM has been pursuing a merger with rival Bunge, both of which have substantial Canadian operations, including wheat mills, oilseed-crushing plants and in the case of Bunge, a stake in Winnipeg’s G3.

That of course follows the trend seen here in Canada in earlier years. Through a series of mergers, transitions and rebranding virtually all the once-familiar names in the Canadian grain sector — the Prairie Pools, United Grain Growers and Pioneer — have one by one disappeared.

It can make for a lot of confusion. Occasionally one feels like they need a scorecard to keep track. In fact we even had our knuckles politely rapped recently by one grain company for continually referring to it as “… the former… “ just to clarify for readers who it had been.

In more practical terms, some decry the ongoing sectoral consolidation as dangerous for farmers. They’re already minnows swimming with sharks, the argument goes, and less competition will always hurt farmers.

Others say the real risk would be for the agriculture sector not to pursue mergers and greater efficiency. Rob Fraley, Monsanto’s executive vice-president and chief technology officer, spoke on the topic this winter with Glacier FarmMedia editorial director Laura Rance, and he argued agriculture is actually behind the trend.

When compared to the communications, pharmaceutical and energy sectors, agriculture research and development spending was well below the other sectors, he noted, adding there are currently 4,000 different food and agriculture firms globally, painting a picture of a very fragmented industry.

Using his own company to illustrate the trend he pointed out Monsanto spends ‘just’ US$1.5 billion annually on R&D. Meanwhile, technology giants such as Google and Amazon are “… spending US$10 billion to US$12 billion,” he said, and major pharmaceutical companies are annually spending between US$8 billion and US$10 billion.

Fraley added he’s convinced mergers will mean more dollars for research, not less, which will ultimately be good for farmers.

We suspect it will be a little of both, some good and some not-so-good implications for farmers. In the meantime, we’re all going to have to memorize a whole new lineup.

About the author

Editor

Gord Gilmour is Editor of the Manitoba Co-operator.

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