Province releases Viterra/Agrium study

Regina — While the Canadian national government will make the final decision on Glencore International’s acquisition of Viterra Inc., the Province of Saskatchewan has commissioned a study on the deal, which includes implications from Glencore’s eventual shedding of input assets to Agrium Inc. The study by Informa Economics is concerned over the vertical integration of Agrium having over 50 percent of the nitrogen production capacity in Canada, and also having after the acquisition the largest network of crop input retailers (42 percent) in Saskatchewan. The study said there is the potential this will harm competition, though it noted that Agrium currently runs its retail and wholesale businesses separately. If they were run in a coordinated effort, the study said the firm might have the ability to sustain price increases in some locations. Viterra’s share of Saskatchewan retailers is 37 percent. After the transaction, Agrium’s would be 42 percent. At the wholesale level, Agrium would own 53 percent and 49 percent of Canadian ammonia and urea production capacity, respectively. The study noted that the Competition Bureau has a criterion suggesting the need for more detailed investigation of a single company with a market share of over 35 percent. The study also noted that the Competition Bureau would view the potential operational efficiencies of Agrium’s large dealer network – 1,250 outlets on three continents – as a consideration that can mitigate concerns about possible negative impacts of the merger. It said Agrium has indicated that it plans to bring best practices from those to the Canadian network. Agrium CEO and President Michael Wilson told analysts last week that the study does not look negative in his view. He said while Agrium’s retail presence in the province would go up 10-15 percent, it is not material, adding that he believes Saskatchewan is looking into the net benefit to the province and is more focused on investment and jobs remaining in the province. “I don’t see a competitive issue,” said Wilson.