Agrium Inc.’s retail division, Crop Production Services, is in talks to buy Miles Farm Supply of Owensboro, Ky. Both companies confirmed the talks. Agrium said no other details were available as of Oct. 21.

Separate industry sources confirmed, however, that Miles had alerted key vendors that the acquisition would be complete Nov. 19.

Miles has 19 retail locations in Kentucky, Indiana, and Tennessee, all of which extend within a 100-mile radius of the company’s main office in Owensboro and together service some 250,000 acres of farmland. According to the company’s Web site, each location offers a full line of fertilizer, agricultural supplies and chemicals, seed, liquid and dry application services, soil testing, and professional fertilizer recommendations.

Miles also operates a wholesale fertilizer division that serves customers in Kentucky, Indiana, Illinois, and Tennessee, with locations at Owensboro, Shelbyville, Ky., and Shawneetown, Ill. The Riverport facility in Owensboro has capacity for 42,000 tons of dry materials and 30,000 tons of liquid fertilizers, and can be supplied by barge or unit train.

In addition to the retail and wholesale operations, Miles’ Web site also lists numerous other business divisions under the Miles Enterprises banner, including the AgriMart agricultural equipment dealership in Owensboro; Big Rivers Agri Supply, a wholesale distributor of crop protection chemistry, liquid and bagged fertilizers, and adjuvants in Kentucky, Indiana, northern Tennessee, southern Illinois, and the Missouri Bootheel; ForagePro; Miles Seed; Miles Financial Services; and the Opti-Crop farm management and crop consulting firm.

Agrium’s CPS, headquartered in Loveland, Colo., was acquired by the company in 1993. Since January 2009, all of Agrium’s retail operations in the U.S. have operated under the Crop Production Services name (GM Oct. 6, 2008).

According to its Web site, CPS already has roughly a dozen retail facilities near Owensboro in locations such as Henderson, Utica, Slaughters, Poole, Clay, Waverly, Morganfield, and Madisonville, and in nearby Indiana locations at Evansville and Mt. Vernon.

Agrium is the largest retail farm store operator in the U.S. At the time of Agrium’s acquisition of United Agri-Products in 2008 (GM May 12, 2008), the company had approximately 870 retail outlets, giving it just under 15 percent of the market. Agrium has made multiple acquisitions since then, including more than 60 farm centers in the U.S. and Canada during the second half of 2009. Among these were 24 Agriliance outlets purchased in November 2009 (GM Nov. 20, 2009).

In June 2009, Agrium President and CEO Mike Wilson said the company planned to double its retail business in the next five years (GM June 22, 2009). This year, (GM Aug. 23, 2010), Agrium reached an agreement with Australia’s AWB Ltd., bringing it another 400 retail locations in that country.

Gavilon LLC and the DeBruce Companies said Oct. 19 that the companies have signed a definitive agreement under which DeBruce will become a wholly owned subsidiary of Gavilon.

Upon completion of the transaction, founder and CEO Paul DeBruce will continue to serve in his current role and join Gavilon’s board of directors. Larry Kittoe, chief operating officer of DeBruce, will also continue to serve in his current role.

“We are pleased to make this announcement with DeBruce and are enthusiastic about the potential this strategic combination will offer our customers, suppliers, and employees,” said Greg Heckman, president and CEO of Gavilon. “This transaction will result in a company that is extremely well-positioned to meet rapidly growing demand for agricultural resources worldwide, by expanding our North American footprint and nearly doubling access to supply.”

“Our two companies are highly complementary,” said Paul DeBruce. “Each has a variety of operating and service-offering strengths to contribute to the combined entity. Identifying and leveraging best practices will enable us to aggressively compete as one of the leading commodity management firms and the third largest grain storage network in the U.S., while enhancing the services we provide our customers and suppliers.”

Gavilon will purchase the DeBruce Companies, including their grain handling facilities, fertilizer distribution network, feed mills, and bean crushing plant. DeBruce Grain Inc. has elevators located in Kansas, Iowa, Nebraska, Texas, Kentucky, Oklahoma, Mississippi, Alabama, Indiana, Wisconsin, and Mexico, with combined licensed storage capacity in excess of 140 million bushels.

The transaction is expected to close in November 2010, subject to receipt of certain regulatory approvals.

Morgan Stanley acted as financial advisor and Jones Day acted as legal advisor to Gavilon, LLC in connection with the transaction. BMO Capital Markets acted as financial advisor and Stinson Morrison Hecker LLP acted as legal counsel to DeBruce in connection with the transaction.

Gavilon, LLC, a unit of The Gavilon Group LLC, Omaha, Neb., is a leading commodity management firm, connecting producers and consumers of feed, food, and fuel through its global supply chain network. Gavilon’s history dates back to 1874, when Peavey Co. built its first grain facility. In 1982, Peavey was acquired by ConAgra Foods, Inc. and later became part of ConAgra Trade Group. In 2008, a group of investors formed Gavilon and acquired ConAgra Trade Group, enabling the newly formed, privately held company to focus on growing its commodity business. Today, Gavilon leverages its strategic partnerships and more than 200 facilities and regional offices worldwide to link agriculture, fertilizer, and energy supply with increasing global demand.

The company provides origination, storage, and handling, transportation and logistics, marketing and distribution, and risk management services to tens of thousands of customers each year and employs more than 1,100 people around the world. For more information, please visit www.gavilon.com.

Founded in 1978, DeBruce, Kansas City, Mo., is a leading agricultural firm. Recognized as one of the premier cross-country truck trading companies in the U.S., DeBruce Grain operates 23 high-speed grain-handling facilities located throughout the Midwest.

DeBruce Fertilizer and DeBruce Ag Service provide quality fertilizer and crop protection products and services. According to its Web site, DeBruce has fertilizer terminals at Creston (24,000 st) and Shenandoah, Iowa; Albany, LaSalle, and Rock Island, Ill.; Wichita, Kan.; Nebraska City, Neb. (40,000 st); Catoosa, Okla. (40,000 st); Amarillo and Tulia, Texas; and Minneapolis, Minn. Retail centers are listed as being at Benton, Creston, and Shenandoah, Iowa, New Carlisle, Ind., Nebraska City, Neb., and Hale Center, Lockney, and Farwell, Texas.

DeBruce also trades feed ingredients, operates a bean crushing plant, and offers freight brokerage services through DeBruce Feed Ingredients Inc., Creston Bean Processing LLC, and DeBruce Transportation, respectively. DeBruce is the fourth-largest privately held company in Kansas City, and employs more than 550 employees nationwide.

Saskatchewan Premier Brad Wall on Oct. 21 said the proposed takeover of PotashCorp by BHP Billiton does not provide a “net benefit” to the people of Saskatchewan and Canada. “Therefore, the Province of Saskatchewan cannot support the current takeover bid by BHP Billiton,” Wall said.

Wall said the government has carefully evaluated the takeover bid and determined that it fails the “net benefit” test in three key areas – jobs and investment, Canadian control of an important Canadian resource, and provincial revenues.

“BHP Billiton’s public statements about Canpotex and about operating at full production create serious concern about the future of Canpotex,” Wall said. “This in turn puts $6 billion worth of capital expansion and thousands of jobs at risk.”

Wall said the proposed takeover also puts at risk a strategic natural resource. “The people of Saskatchewan are justifiably proud of PotashCorp and the success it has achieved here and around the world,” Wall said. “Do we want to add PotashCorp to that list of once-proud Canadian companies that are now under foreign control?”

Wall also said a BHP takeover would mean a significant loss in provincial revenues that are needed to fund roads, schools, and hospitals. “That revenue is also needed to keep our tax levels competitive for other businesses and for Saskatchewan families,” Wall said.

Wall also expressed concerns about the ability of federal authorities to enforce restrictions should approval be granted with specific conditions. “In the past decade, promises about maintaining jobs, corporate headquarters, and future investment have all been broken,” Wall said. “We simply cannot take that risk with this valuable resource that belongs to the people of Saskatchewan.”

Wall said the answer “no” is not unprecedented, and that Australia has done the same thing when its resources were threatened. “When Shell bid $10 billion for a controlling stake in the leading company developing Australia’s offshore natural gas reserves, an answer came in April of 2001, and that answer was also ‘no’,” Wall said. “Australia’s then-Treasurer, Peter Costello, said it was in the country’s best interests to have these offshore reserves to be ‘unequivocally managed, operated, and marketed for Australia’.

“It’s our government’s belief that the people of Saskatchewan deserve nothing less than a potash industry unequivocally managed, operated, and marketed for the benefit of Canada and Saskatchewan.”

Potash reiterates position as Saskatchewan company

PotashCorp said it shares Wall’s bright outlook for the company and the industry. It reiterated its own opposition to the BHP deal and its stance as a distinctly Saskatchewan and proudly Canadian company. It noted that the company employs 2,400 in Canada, and said that the few executives in charge of corporate support services who do not already live in Saskatoon are relocating. It noted that nine of the company’s 12 directors are Canadian citizens. Furthermore, it said Canpotex employs 88, with 65 of those in Saskatoon.

BHP responds to Saskatchewan opposition

On Oct. 20, BHP responded to Saskatchewan’s opposition even before it was officially announced by Premier Wall on Oct. 21. BHP says it continues to believe that the proposed acquisition will create net benefits for Saskatchewan, New Brunswick, and Canada, and that it is committed to working with the Government of Canada’s Investment Review Division (IRD) to secure the Federal Minister of Industry’s approval under the Investment Canada Act. A decision by the federal government is expected Nov. 3.

BHP reiterated that it is prepared to make significant commitments by way of undertakings to the Minister of Industry in order to ensure the proposed acquisition of PotashCorp will be a net benefit to Canada. These include:

• Returning the head office and management control of the potash business to Saskatchewan by basing its global potash business in the province and transferring relevant management functions currently based at PotashCorp’s centre in Chicago back to the province;
• Establishing BHP’s global potash headquarters in Saskatoon. The leadership team would live, pay taxes, and raise their families in Saskatoon – not just maintain residences there; and
• Maintaining current levels of employment at PotashCorp’s Canadian operations.

The province has stated that it will lose $3 billion in revenue as a result of the acquisition. BHP said it is confident it can address this concern and is prepared to make commitments which go beyond the requirements of prevailing Canadian legislation that should effectively address the tax loss concerns of the province.

“Our focus continues to be on working with the Government of Canada and demonstrating the significant net benefits we can bring to the country,” said Andrew Mackenzie, BHP Chief Executive Non-Ferrous. “We believe that by combining PotashCorp’s operations with BHP Billiton and returning control of PotashCorp to Saskatchewan, we can create a stronger business that will help ensure Saskatchewan is at the centre of the global potash industry for decades to come. BHP Billiton is willing to commit substantial resources to a province and a country that it believes is a welcome place to invest. We are ready to underline our commitment to Canada with substantial undertakings on jobs, taxes, investment, and community spending that will create immediate benefits for the people of Saskatchewan and the nation more broadly.”

BHP notes that it has a strong track record of meeting its commitments in Canada. Over the last decade, the company’s EKATI diamond mine in the Northwest Territories has exceeded its targets for spending with local businesses, employing Aboriginal and Northern workers, and supporting community projects. In that time BHP has spent over $3.4 billion with local suppliers in the Northwest Territories and created over 10,000 jobs, exceeding initial estimates of EKATI’s economic benefit.

“Blocking stake” floated as alternative

The latest alternative being floated as a buyer for PotashCorp is a “blocking stake” of 30 percent that would reportedly be bought up by Canadian pension funds. The theory is that this stake would be large enough to block BHP’s takeover attempt. Alberta Investment Management Co. (Aimco) was reportedly keen on this deal, according to The Globe and Mail.

Also a part of this theory is that potash from one of PotashCorp’s mines might be devoted to meet Chinese demand, with an escalator clause added to assure that prices are adjusted periodically. This is somewhat similar to the news this week that Sinofert will be buying over 3 million mt of Canpotex potash over the next three years with prices adjusted every six months (see Potash, page 9).

Other alternatives have also been mentioned, including the sale of PotashCorp nitrogen and phosphate assets. This would perhaps explain speculation in the industry this past week about a possible sale of the nitrogen assets to Yara International ASA and the phosphates to The Mosaic Co. To date, PotashCorp has complained that BHP has not leveled with shareholders about its true intentions regarding the N and P assets.