A Viterra grain elevator outside of Indus, Alta. on April 23. Canada’s Competition Bureau has come out against the proposed US$8.2-billion merger between the agriculture division of Glencore PLC, which includes Viterra, and Bunge Ltd., citing 'substantial anti-competitive effects' in Canada.Gavin John/The Globe and Mail
Canada’s Competition Bureau has come out against U.S. grain dealer Bunge Ltd.’s BG-N proposed US$8.2-billion acquisition of agriculture giant Viterra, citing a number of substantial anti-competitive concerns.
Following a review, Competition Commissioner Matthew Boswell determined the deal is likely to lessen competition in agricultural markets in Canada in several areas such as grain sales, storage and processing operations. The bureau’s report also raised concerns surrounding G3 Global Holdings LP, a competitor to Viterra that is 25-per-cent owned by Bunge.
Viterra, the agricultural arm of global commodities producer Glencore PLC GLNCY, operates a network of grain elevators, special crops facilities, processing plants and port terminals across Canada and parts of the United States.
Glencore paid $6.1-billion for Viterra in 2012, and later rolled the company into its agricultural division, which adopted the Viterra name in 2020.
The Competition Commissioner has been vocal about updating the country’s competition framework. In a high-profile 2022 speech, Mr. Boswell warned Canada’s competition rules and guidelines enable high levels of economic concentration, and even monopolies, in the Canadian economy.
Mr. Boswell also tried to block Rogers Communications Ltd.’s $20-billion purchase of Shaw Communications. Although the deal was ultimately approved by the federal government, Rogers was forced to sell wireless provider Freedom Mobile, which Shaw owned, to Quebecor Inc.
Glencore has a 49.9-per-cent stake in Viterra after selling large positions to pension funds Canada Pension Plan Investment Board and British Columbia Investment Management Corp. in 2016 because it needed to repay debt.
CPPIB owns 40 per cent of Viterra and is supporting the sale. CPPIB will receive a 12-per-cent stake in the combined company as well as US$800-million in cash. BCI owns the remaining 10 per cent of Viterra.
St. Louis, Mo.-based Bunge, which is known for processing agricultural commodities struck a deal last summer to buy Viterra for US$8.2-billion in shares and cash, with US$6.2-billion in stock and US$2-billion in cash.
In a joint statement Tuesday, Bunge and Viterra said the bureau’s concerns are “misplaced,” and said the report “had no specific competition concerns for grain purchasing in Eastern Canada and in most of Western Canada, for port terminal operations, for meal sales, and for sales of the vast majority of downstream refined and specialty oil products.”
Instead, they argued, the bureau identifies localized concerns relating to the purchase of canola in the Nipawin, Sask., and Altona, Man., areas, and related to canola oil sales to a small segment of customers in Eastern Canada.
Viterra and Bunge played down Bunge’s 25-per-cent stake in Saudi-backed G3 Global Holdings LP, which operates 20 grain elevators in Canada, simply noting there is a “potential concern” from the bureau.
However, the bureau said in its report that the deal would combine “the company with the most oilseed crushing facilities and the company with the most primary grain elevators in Western Canada.”
The grain that farmers grow can be sold to primary grain elevators, which stockpile and store the product, or it can be sold to process elevators, including oilseed-crushing facilities, that produce processed products like oils and meals.
The bureau is also concerned about a “substantial lessening of competition for the purchase of canola between Bunge and Viterra in certain markets in Western Canada,” as well as “substantial anti-competitive effects with respect to the sale of canola oil in Eastern Canada to customers who cannot receive oil by rail.”
As for G3, which was created in 2015 to develop new grain handling and export infrastructure in Canada, the Competition Bureau noted its parent company is joint-owned by Saudi Agricultural and Livestock Investment Co. and Bunge. If the Viterra deal is completed, Bunge will be able to materially influence G3 because of access to confidential information, the bureau said.
“G3 is one of the most significant and fastest-growing rivals to Viterra for the purchase of grain in a number of markets in Western Canada, and evidence reviewed by the bureau suggested that G3 is perceived as a particularly aggressive competitor,” the bureau wrote in its report.
It also noted the grain supply chain “is a critical part of Canada’s economy, generating economic growth and international trade” adding that this chain ensures Canada’s domestic food supply.
The Competition Bureau said it came to its conclusion following interviews with more than 70 stakeholders in the relevant markets, retaining two independent expert and relying on millions of records such as strategic, marketing and business planning documents.
The report is being provided to the federal Transport Minister, who will consider its recommendations when reviewing the sale.
Typically, the Competition Bureau will not challenge a merger if the postmerger market share of the merged firm is less than 35 per cent. Despite its recent streak of being more assertive, the Bureau approved Royal Bank of Canada’s $13.5-billion purchase of HSBC Bank Canada late last year.
Tim Kiladze