Saudi-backed group to control former Canadian Wheat Board

[WINNIPEG] A Saudi-backed company agreed to buy a majority stake in the former Canadian Wheat Board in a C$250 million (US$203 million) deal that gives it access to grain exports from Canada.

Bunge and state-owned Saudi Agricultural & Livestock Investment Company (SALIC) will acquire a 50.1 per cent stake in CWB through a joint venture, White Plains, New York-based Bunge said Wednesday in a statement. The transaction is expected to close in July.

SALIC was established in November 2011 to secure adequate food supplies for Saudi Arabia, according to its website. The Riyadh-based company makes investments in countries with surplus grain, and the transaction announced today "fits exactly with their vision," said Karl Gerrand, chief executive officer of the Bunge-SALIC joint venture G3 Global Grain Group.

"We have surplus exportable grain that's available in Canada," Mr Gerrand said Wednesday at a press conference in Winnipeg.

The federal government ended the Winnipeg-based Canadian Wheat Board's seven-decade marketing monopoly on wheat and barley on Aug 1, 2012, in an effort to increase competition in grain-handling. Since then, the company has acquired Mission Terminal, Prairie West Terminal, Great Sandhills Terminal and announced the construction of four grain elevators.

The government had given CWB four years to submit a "commercialization" plan to the minister of agriculture.

The federal government isn't concerned about a Saudi-backed company buying a stake in the former Canadian Wheat Board, Agriculture Minister Gerry Ritz said Wednesday at the press conference. Industry Canada has approved the acquisition, he said.

Pat Martin, an opposition Member of Parliament from Manitoba, said it was a "sad day for the Canadian grain industry," noting that the former wheat board protected farmers from the "agrifood giants who are now taking over." "They've taken a US$6 or US$7 billion business, legislated it out of business, and handed it over to American and Saudi businesses that until recently were its greatest competitors," Mr Martin said in a telephone interview.

The acquisition is the third major deal in 15 months involving a state-owned company from a grain importing country buying control of a food commodity trader.

In February 2014, Cofco Corp, China's largest grain trader, bought a 51 per cent stake in Dutch-based trader Nidera. The deal valued Nidera at US$4 billion, including debt. In April, Cofco agreed to pay US$1.5 billion for a 51 per cent stake in Noble Group's agricultural trading unit.

As major importers such as Saudi Arabia and China take control of grain trading companies, they could bypass the traditional giants of the industry: Cargill, Bunge, Archer- Daniels-Midland Co. and Louis Dreyfus Commodities BV. The four firms are known as the "ABCD" of grains because of their initials.

Saudi Arabia is the world's largest importer of barley, and among the top-15 for sorghum, corn and wheat, according to data from the US Agriculture Department.

Bunge owns a majority stake in the newly established Winnipeg-based G3, Mr Gerrand said at the press conference.

Bunge is one of the largest oilseed processors and manufacturers of edible oil products in the country, according to Bunge's website. The company opened its newest Canadian crushing plant in Altona, in the southern part of Manitoba, in late 2014.

G3 has very aggressive strategic plans and will explore opportunities for further investment in Canada, including the West Coast, once Bunge's assets are fully integrated with CWB, Mr Gerrand said in a telephone interview.

While it will be a "smaller player" in Canadian agriculture industry, the company wants to help fix grain bottlenecks by offering more efficient facilities and work with farmers who will have a stake in the business, he said.

CWB evaluated more than 50 potential investors, CEO Ian White said at the press conference. The C$250 million will stay within the private company and the outstanding 49.1 per cent will be available for farmers to acquire through equity, he said.

"From our perspective, this is a very good day for the CWB," White said.

BLOOMBERG