The acquisition of Regina-based Viterra by global agribusiness and food company Bunge has been in the works for some time, and the move has been met with concerns from the industry focused mostly on the long-term impact on grain market competition.

A statement from Saskatchewan NDP Leader and agriculture and rural affairs shadow minister Carla Beck emphasized her disappointment in the announcement of the government approval.

“We’ve been clear since day one that this deal is bad for Saskatchewan. This large consolidation puts head office jobs, agriculture and value-added jobs across Saskatchewan and canola crush projects all at risk, and our world-class producers are going to take a hit on their incomes,” she said.

“The federal and provincial governments should not have rolled over and let this anti-competitive merger go through. They should have stood up for Saskatchewan, instead of selling it out.”

Grain Growers of Canada (GGC) also released a statement expressing frustration over the approval, which the GGC said could hit Canadian grain farmers with a loss of $770 million in revenue annually.

“This is a missed opportunity to protect competition in Canada’s grain sector and prioritize the interests of producers who grow the food that Canada and the world rely on,” GGC executive director Kyle Larkin said in a press release.

“We are urging the government to revisit these conditions, strengthen measures to foster competition, and take meaningful steps to support Canada’s grain farmers.”

The merger approval does come with conditions. Some of the conditions require Bunge to divest of six grain elevators in western Canada, invest at least $520 million in Canada in the next five years and retain Viterra’s head office in Regina for at least five years.

Agricultural Producers Association of Saskatchewan (APAS) President Bill Prybylski said that while he is cautiously optimistic that some producers’ concerns have been addressed with conditions on the transaction, he believes more can be done to support farmers and ensure a competitive marketplace for Canadian producers.

“The government’s decision has begun to address critical issues we’ve raised, particularly around the need for enhanced competitiveness and sustainability for farmers. However, achieving real progress requires these policies to move beyond initial promises towards practical and impactful outcomes,” Prybylski said in a statement on Wednesday.

“While we acknowledge the government’s efforts in addressing the concerns raised by Saskatchewan farmers in its decision, it is essential that these conditions are more than just words on paper. Farmers need real action that translates into enhanced competitiveness and sustainability in the grain industry.”

Canadian Federation of Agriculture President Keith Currie also voiced his frustration on the matter, adding that Bunge retaining its stake in G3 raises eyebrows about fairness in the marketplace.

“We need to ensure that, at a minimum, the conditions set around this deal are being met. Our concerns from the beginning were that this deal would not be in the best interests of farmers and the fact that Bunge has maintained its minority ownership stake in G3 certainly furthers those concerns,” Currie said.

“Unfortunately, at the end of the day, it is the farmers who will pay.”

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The merger, which would create a company worth US$34 billion including debt, would bring the combined company closer in global scale to Bunge’s leading rivals ADM and Cargill.

The proposed combination with Glencore-backed Viterra, however, is attracting scrutiny from regulators concerned about consolidation in the agricultural sector.

Heckman told Reuters healthy commodities market competition in Canada, the U.S., Brazil, Argentina, China and parts of Europe should allow Bunge to avoid having to sell assets to gain approval for the merger from antitrust authorities.

But if asset liquidations are required, Bunge believes demand for its assets is very strong, Heckman said at Reuters’ Transform Food USA event in Minnesota.

“If we have to sell some assets, everybody has called to be on the list to buy them. We’ll get a very fair price,” he said.

Bunge expects to finalize the deal by mid-2024 after closing conditions are met and regulators sign off on the deal.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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After the news leaked out last month, Rotterdam-based Viterra confirmed Tuesday morning it’s “concluded an agreement” to merge into Bunge — the St. Louis-based “B” in the “ABCD” of the companies handling the bulk of global grain trade — under the latter company’s banner.

Viterra’s shareholders, which include international commodities trader Glencore, the Canada Pension Plan Investment Board and British Columbia Investment Management Corp., will receive about 65.6 million shares in Bunge — worth about $6.2 billion — and $2 billion cash (all figures US$).

Once a $2 billion share repurchase plan Bunge announced in tandem with the merger is completed, the Viterra shareholders would together hold about 33 per cent of the merged company, up from 30 when the merger deal closes. Viterra shareholders would not take part in the share buyback plan.

The deal also calls for Bunge to assume about $9.8 billion in Viterra debt.

“Our highly complementary asset footprints will create a network that connects the world’s largest production regions to areas of fastest growing consumption, enhancing the geographical balance and adaptability of our global value chains and benefitting farmers and end-customers,” Bunge CEO Greg Heckman said in a release.

“In combining our highly complementary origination, processing and distribution networks, we are better positioned to meet the increasing demand for the food, feed and fuel products we offer,” Viterra CEO David Mattiske said in the same release.

“Together, we will play a leading role in the future of the agriculture industry, developing fully traceable, sustainable supply chains and moving towards carbon-neutral operations, while creating a strong growth platform for our combined business.”

Heckman and Bunge CFO John Neppl would remain in their posts with the merged firm, while Mattiske would become the new firm’s “co-chief operating officer.”

The two companies said the combination is expected to generate about $250 million per year in gross pre-tax “operational synergies” within three years of closing, plus “significant incremental network synergies” and “relatively more stable cash flows from the larger, more diversified footprint.”

Those synergies, Heckman said on a conference call later Tuesday morning, would not be based on reduced staff head count but rather mainly on “operational” synergies such as asset utilization and procurement savings. In terms of human capital, he said access to talent in the agrifood sector is “at a premium.”

The combined firm would be based in St. Louis, where Bunge relocated its global head office from White Plains, N.Y. in 2019. Rotterdam, where Viterra’s global head office sits today, “will be an important commercial location in the future of the combined company.”

Glencore and CPP Investments would each be able to name two members to the merged Bunge board, while Bunge would nominate the remaining eight. Glencore and CPP’s shareholder agreements with Bunge also include a 12-month lock-up period on sales of Bunge shares.

For its part, Toronto-based CPP Investments said separately its 40 per cent stake in Viterra will translate to about a 12 per cent equity stake in Bunge and about $800 million.

On Tuesday’s conference call, Bunge said its own shareholders would have 70 per cent equity in the combined firm when the deal closes, while Glencore would have 15 per cent and BCIC, three per cent.

“Combining these two highly complementary companies will create an enhanced agribusiness that can provide an expanded product offering to end-customers, with an increased ability to innovate and promote sustainable practices in the global food supply,” Bruce Hogg, head of sustainable energies with CPP Investments, said in a separate release.

Glencore CEO Gary Nagle, in a separate release, said the deal “is expected to realize significant value for Glencore” and described the planned merged group as “a premier pure-play agribusiness solutions company, well placed to meet increased global demand as well as the ongoing challenge of providing sustainable, traceable food and feed products to customers around the world.”

Bunge and Viterra said the merger is expected to close in mid-2024, subject to the usual closing conditions, including approval by Bunge shareholders and the relevant regulatory approvals.

Those approvals are likely to include review by Canada’s Competition Bureau, given Viterra’s significant stakes in Prairie grain handling, oilseed crushing and port terminal capacity, and Bunge’s stakes in Canadian crushing and its part-ownership of Prairie grain handler G3.

Asked on Tuesday’s conference call about any plans to divest assets to appease regulators in countries where the two firms operate, Neppl described the companies’ asset footprints as “very complementary” and said Bunge looks forward to working with regulators and “helping them to understand the footprint.”

Viterra formed in 2007 in a merger of Saskatchewan Wheat Pool with Agricore United — the latter having formed in a 2001 merger of the former Alberta and Manitoba wheat pools with another former Prairie grain co-operative, United Grain Growers (UGG).

The Regina-based firm went international in 2009 with a deal for Australia’s ABB Grain, then was majority-acquired by Glencore in 2012, becoming Glencore Agriculture before rebranding as Viterra internationally in 2020. It expanded its U.S. footprint last year with a takeover of grain firm Gavilon.

Bunge formed as a trading company in Amsterdam in 1818, expanding to Argentina in 1884, Brazil in 1905 and North America in 1918, moving its global headquarters from Brazil to the U.S. in 2001, when it became a publicly traded company.

Bunge’s stake in Winnipeg-based G3 was acquired through a joint venture with a Saudi state grain firm in 2015, which bought the assets of the privatized Canadian Wheat Board. — Glacier FarmMedia Network

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CN now has until the end of Friday to submit a better offer or lose its deal with KCS. At stake is the creation of the first direct railway linking Canada, the United States and Mexico.

KCS’s change of heart came after the U.S. Surface Transportation Board (STB) rejected a temporary “voting trust” structure last month that would have allowed KCS shareholders to receive the $325-per-share cash-and-stock consideration under the deal with CN without having to wait for full regulatory approval.

CP has had its proposed voting trust cleared by the STB. The regulatory certainty this provided convinced KCS’s board to switch to a deal with CP, even though its offer was lower than CN’s, according to people familiar with the deliberations.

There is a silver lining for KCS. The CP offer it now plans to accept, worth $300 per share in cash and stock, is better than the $275 per share cash-and-stock deal that the two companies had clinched in March, before CN gatecrashed it and entered into an agreement with KCS in May (all figures US$).

Were CN to lose out to CP, it would receive from KCS a $700 million breakup fee and would be reimbursed for another $700 million it paid KCS to pass on to CP as a breakup fee for terminating their March deal. CP has said it will cover the cost of this $1.4 billion that KCS would owe CN.

CN has also faced pressure from some of its investors, including hedge fund TCI Management, to abandon its pursuit of KCS.

CN did not immediately respond to a request for comment on its next steps.

The STB said last month that even though the overlap of CN’s and KCS’s networks was confined to 113 km between Baton Rouge and New Orleans, the two railways operated parallel lines in the central portion of the U.S. and could be under less pressure to compete if the voting trust for that deal was approved. It added that it was not making a final determination on whether the competitive issues that the deal faced could be resolved under a full regulatory review.

U.S. President Joe Biden has issued sweeping executive orders aimed at promoting competition in the U.S. economy. One order encouraged the STB to consider Amtrak’s statutory rights when assessing whether a rail merger is in the public interest.

Passenger railroad Amtrak, majority owned by the U.S. government, had opposed CN’s proposed voting trust, saying its pledge to divest the Baton Rouge to New Orleans line will harm future passenger service in Louisiana.

CP reiterated Sunday that its merger with KCS would maintain all existing freight rail gateways and maintain competition in the Baton Rouge to New Orleans corridor, while “creating new north-south lanes” between Western Canada, the U.S. upper Midwest and the Gulf Coast and Mexico.

Also, CP said, its deal with KCS would create a route network that “does not funnel all of its traffic through the congested Chicago area.”

— Reporting for Reuters by Radhika Anilkumar in Bangalore and Greg Roumeliotis in New York. Includes files from Glacier FarmMedia Network staff.

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The decision was a blow to the deal that would create the first direct railway linking Canada, the U.S. and Mexico.

The voting trust would temporarily own Kansas City Southern without CN exerting control. It would have allowed KCS shareholders to receive and keep the $325 per share in cash and stock CN was offering, even if the combination was subsequently rejected by the regulator, the U.S. Surface Transportation Board (all figures US$ except where noted).

The STB said it left the door open for the companies to seek full review of their proposed merger. Regulatory experts said the process would be uncertain and could last more than a year. The companies did not immediately respond to requests for comment on their next steps.

KCS has an alternative suitor, Canadian Pacific Railway (CP), whose $25 billion deal to buy the company in March was later trumped later by CN.

Canadian Pacific’s proposed voting trust was approved in May, and this month the company presented a new $27 billion cash-and-stock bid for Kansas City Southern, confident the STB would reject CN’s voting trust.

CP did not immediately respond to a request for comment, but CP CEO Keith Creel said in a release that the company’s Aug. 10 offer to KCS “still stands.”

The STB’s ruling, Creel said, “clearly shows that the CN-KCS merger proposal is illusory and not achievable” and “knowing this, we believe (CP’s offer) recognizes the premium value of KCS while providing regulatory certainty (and) ought to be deemed a superior proposal.”

KCS shares closed on Tuesday down 4.39 per cent at $280.67. CN shares closed up 7.36 per cent at $148.40, indicating relief from shareholders that the acquisition now looks unlikely. CP shares dropped 4.55 per cent to C$86.69, highlighting trepidation among its shareholders over paying up for a deal with KCS.

After the STB decision, a CN shareholder, hedge fund TCI Management, sent a letter to the company’s board urging it to cancel its deal with KCS and replace CEO Jean-Jacques Ruest with Jim Vena, a veteran of both CN and Union Pacific. Vena could not be immediately reached for comment.

“The board must take responsibility for the company’s recent underperformance and failure,” TCI said in the letter. The fund, run by hedge fund veteran Chris Hohn, has a 5.2 per cent stake in CN and is also CP’s largest shareholder.

The STB said that even though the overlap of CN’s and KCS’s networks was confined to about 113 km between Baton Rouge and New Orleans, the two railways operated parallel lines in the central portion of the U.S. and could be under less pressure to compete if the voting trust was approved.

“The board finds that applicants have not demonstrated that their use of a voting trust would be consistent with the public interest,” the STB said in a statement.

U.S. President Joe Biden has issued sweeping executive orders aimed at promoting competition in the U.S. economy. One order encouraged the STB to consider Amtrak’s statutory rights when assessing whether a rail merger is in the public interest.

Passenger railroad Amtrak, majority owned by the U.S. government, had opposed CN’s voting trust, saying its pledge to divest the Baton Rouge to New Orleans line will harm future passenger service in Louisiana.

— Reporting for Reuters by Shreyasee Raj and Abhijith Ganapavaram in Bangalore and Greg Roumeliotis in New York. Includes files from Glacier FarmMedia Network staff.

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The board for Kansas City Southern (KCS), in a release Aug. 12, said it unanimously agrees an upgraded Aug. 10 cash-and-stock bid from Canadian Pacific Railway (CP) “does not constitute a ‘company superior proposal'” and will continue to recommend its shareholders vote in favour of a deal with CN.

The recommendation from KCS’ board doesn’t yet end the tug-of-war between CN and CP for control of KCS, with either outcome creating a North American railway stretching coast-to-coast in Canada and south through the U.S. Midwest to Gulf ports in both the U.S. and Mexico.

CP and KCS in March reached a deal for a friendly $25 billion combination, in which KCS shareholders would get $90 cash and 0.498 CP shares per KCS share (all figures US$). CN on April 20 announced its own $33.6 billion bid, worth US$200 cash and 1.059 CN shares per KCS share. KCS on May 21 formally walked away from CP’s bid and announced a “definitive” deal with CN.

CP then countered on Aug. 10 with a new $31 billion bid, at $90 cash plus 2.884 CP shares per KCS share.

While lower than CN’s bid overall, CP said its new bid is “substantially similar to (the terms of) the CN merger agreement, but offers significantly higher regulatory certainty than the proposed CN merger and significantly higher value than our previously agreed combination.”

CN’s proposal, meanwhile, remains subject to the U.S. Surface Transportation Board’s (STB) approval of a CN-KCS voting trust, in which affected shareholders temporarily assign voting rights to a third-party trustee. CP’s use of a voting trust for its March bid got STB approval on May 6.

The STB said last week it will rule on the proposed CN-KCS voting trust by the end of this month. With no ruling yet issued, KCS — which had planned to hold a special meeting of shareholders Thursday to vote on the deal — instead announced Thursday it will postpone that meeting to Sept. 3.

CP on Thursday hailed KCS’ decision to postpone the meeting, saying it “appropriately will allow stockholders to have access to all the information needed before voting on the CN-KCS merger proposal, including the critical decision by the (STB) on (CN’s) proposed voting trust.”

Also, CP said, postponing the vote means KCS shareholders “won’t become locked into a CN-KCS combination and then unable to consider other, better options like CP’s Aug. 10 proposal, which remains outstanding.”

KCS said Thursday it and CN are “confident that the (CN-KCS) voting trust meets all the standards and the public interest test set forth by the STB and believe that it should be approved.”

‘Customer access’

CP and its supporters contend that a CN-KCS merger does not create an “end-to-end” combination of rail lines, as both CN and KCS operate lines between Baton Rouge and New Orleans — an overlap CN has proposed to remedy by selling the 112-km KCS line between the two Louisiana communities.

CP said that proposed divestiture still “does not address many shippers and stations that are today served by both KCS and CN in markets like Omaha/Council Bluffs, Jackson, Miss., Springfield, Ill., and St. Louis.”

Selling the Louisiana line, CP said, also “does not address geographic competition between CN and KCS in numerous areas where each of them competes to handle similar commodities to/from different shippers, terminals, and transloads in the same region.”

Further, CP said, “it does not address the impact a CN/KCS combination would have on customer access to CP routes serving the upper (U.S.) Midwest and Canada.”

Also, CP said, “during the year and a half when CN would be seeking to close their acquisition of KCS, competition in this corridor would be diminished as CN and KCS managers each would know that their railroads’ profits flowed to the same owner — CN.”

CP also contended that if CN is allowed to hold KCS in trust for 3-1/2 years, it would leave CN as “the winner whether it competes or not” and shippers would “lose competition during that entire period regardless of the outcome of the (STB) approval process.”

KCS, in a presentation to investors earlier this month, said “only 39” CN and KCS customers in the U.S. would see a reduction in the number of available railroads from three-to-two or two-to-one — and all those customers are “on or near” the Louisiana track CN proposes to sell.

Further, KCS said, the “vast majority” of the 406 other rail customers in the U.S. areas CP cites will continue to have access to four or more railroads. — Glacier FarmMedia Network

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The five commissioners, three Democrats and two Republicans, voted unanimously to approve the policy statement.

“The FTC has a range of tools it can use to root out unlawful repair restrictions and today’s policy statement would commit us to move forward on this issue with new vigour,” FTC chair Lina Khan said at an unusual open hearing, the second held by the agency this month.

Commissioner Noah Phillips, a Republican, supported the step. “While there are repair restrictions that are legitimate, whether it’s smartphones or tractors, I absolutely agree that there are many unwarranted restrictions that make it (repairs) excessively difficult and expensive,” he said.

The vote followed an agency report released in May that found that manufacturers often discourage repairs by third parties that can charge consumers less than dealers. These include disparaging spare parts not made by the manufacturer, and license agreements.

The issue was one of dozens spelled out in an executive order that the Biden White House put out this month.

The U.S. Chamber of Commerce vehemently objected to the way the meeting was conducted. Sean Heather, a chamber vice-president, said the agency’s new open meetings “have embraced a vote now, discuss policy later approach that ignores public input, making the entire process anything but transparent and above board.”

The FTC’s commissioners voted along party lines to rescind a 1995 policy statement regarding prior approval of mergers. With the statement rescinded, a company that had been stopped from proceeding with one merger must give prior notice to the FTC if it is contemplating a similar transaction. The FTC could then stop the new deal without spending months to investigate the new deal.

Commissioner Christine Wilson, a Republican, said there was no evidence to support scrapping the 1995 policy statement.

Commissioner Rebecca Slaughter, a Democrat, said FTC staff spent a lot of time and resources looking at “clearly anti-competitive” mergers. “I think a lot about the deterrent effect that we need to be sending,” she said.

The FTC also voted unanimously to keep a rule requiring clothing manufacturers to spell out how their clothing should be cared for but indicated that it would update it.

— Reporting for Reuters by Diane Bartz.

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Cannabis demand surged last year as many people turned to pot during COVID-19 lockdowns for entertainment and relaxation. The industry is now benefiting from hopes of federal marijuana reform in the U.S. following a recent wave of legalization that has swept many key states.

Legalization hopes have been driving a surge in dealmaking, with Ottawa-based Hexo alone signing two other deals in the last five months. In February, Hexo said it was taking over Zenabis Global for $235 million, giving it access to the European medical cannabis market.

Earlier this month, Hexo announced the purchase of 48North Cannabis for about $50 million.

Company executives from both Hexo and Redecan noted the importance of a combined portfolio on a call with analysts, saying a “strong home market foundation is imperative to form meaningful international expansion.”

Mergers and acquisitions will be part of Hexo’s strategy until the company is one of the top three global cannabis products maker, Hexo CEO Sebastien St-Louis said.

Redecan shareholders will get $400 million in cash and $525 million in Hexo shares at an implied price of $7.53 at the close of the deal, which is expected in the third quarter of 2021.

Redecan shareholders will hold about 31 per cent of the combined entity and will receive the right to nominate up to two members to Hexo’s board.

— Reporting for Reuters by Arunima Kumar in Bangalore.

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The Canadian rivals have been locked in a takeover battle for the U.S. railroad operator for two months to create the first railway spanning the U.S., Mexico and Canada, as they stand to benefit from a recent pick-up in trade.

Kansas City Southern last week accepted CN’s $33.6 billion offer, upending a $29 billion deal with its competitor CP (all figures US$).

The U.S. railroad on Friday said it paid CP a breakup fee of $700 million, which would be reimbursed by CN.

CP said Friday it was willing to re-engage with Kansas City, hoping that the rival bid would be shot down by the U.S. Surface Transportation Board (STB), a regulator that oversees railroad companies.

CN’s deal has recently run into regulatory hurdles, with the STB having denied its motion for approval of a voting trust earlier this week. The U.S. Department of Justice had also said last week that CN’s bid for Kansas City appears to pose greater risks to competition.

CN and Kansas City said they expect to gain all the required regulatory approvals, including that from STB.

Kansas City said the deal is expected to close in the second half of next year, following which its shareholders will own 12.6 per cent of the combined company.

— Reporting for Reuters by Arathy S Nair and Sanjana Shivdas in Bangalore.

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Hohn’s TCI Fund Management, which has a 2.93 per cent stake in CN, said the company should not go ahead with its plan to create a voting trust structure for the takeover.

“CN regularly engages with and welcomes constructive input from its shareholders. CN’s board believes its pro-competitive combination with Kansas City Southern is in the best interest of CN’s shareholders,” a spokesperson for CN in a statement.

CN and Canadian Pacific Railway are seeking to buy U.S. railroad Kansas City Southern to create a North American railway spanning the U.S., Mexico and Canada.

Kansas City last week accepted CN’s $33.6 billion acquisition offer, upending a $29 billion deal with CP (figures US$ except where noted).

“We think it is negligent and hugely irresponsible for the CN board to commit C$2 billion of shareholders’ money on whether the STB will approve the voting trust for the CN-KCS transaction,” TCI said in a letter to CN chairman Robert Pace.

The C$2 billion stems from the $700 million breakup fee CN would pay CP on KCS’ behalf for upending its deal, and the $1 billion it would pay KCS if the U.S. Surface Transportation Board (STB) shoots down the voting trust.

A voting trust is a temporary ringfenced structure that CN would use to hold KCS after the deal closes without exercising control over it, until the STB approves or rejects the acquisition.

U.K.-based TCI is also the largest shareholder of CP, with an 8.38 per cent stake, according to Refinitiv data.

“It is now clear that CN should abandon its pursuit of KCS unless the merger agreement is amended such that it is not conditional on a voting trust being approved,” TCI added.

TCI said it believes the STB reviewing CN’s bid under the new rules makes approval for the deal uncertain.

— Reporting for Reuters by Sanjana Shivdas in Bangalore.

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