Canada Questions Grain Giants' Merger

OMAHA (DTN) -- The Canadian government says an $18 billion joining of grain giants Viterra Limited and competitor Bunge Limited is likely to lead to "substantial anti-competitive effects in agricultural markets" and take away the rivalry between the two companies in many markets.

The Canadian Competition Commission issued a report Tuesday on the acquisition, which has already been approved by Bunge Limited shareholders. Combined, U.S.-based Bunge and Netherlands-based Viterra Limited for nearly $115 billion in revenue in 2023 globally and more than $5 billion in earnings before taxes, depreciation and amortization. The companies announced their merger last June.

The report goes to Canada's Minister of Transport, which will make another assessment. A final decision later this year will be made by Canada's Cabinet over whether to allow the merger within Canada or place conditions on it.

COMPANIES STILL EXPECT APPROVAL

In a joint statement, Bunge and Viterra said the concerns were "misplaced" and they still expect to receive the required regulatory approval and complete the sale in mid-2024.

While U.S. regulators have not weighed in on the sale, Canadian agricultural groups last fall called for both federal and provincial governments to conduct merger reviews.

Agricultural groups in Saskatchewan called for "rigorous oversight" of the Bunge-Viterra deal. Farm groups in Saskatchewan specifically noted the impacts of competition in grain handling and the implications on commodity prices.

GOVERNMENT CONCERNS

One problem the Canadian government cited in the merger is that Bunge already holds a 25% minority interest in another Canadian grain company, G3, which has "significant grain elevator and terminal elevator assets in Canada."

The Competition Commission review cited, "Bunge is likely able to materially influence G3 through its minority interest, and the ability of the combined Bunge-Viterra entity to access G3's confidential information and influence G3's economic behavior will pose competition concerns following the proposed transaction," according to the government's report.

Another issue is the merger would likely lead to less competition for canola purchases between Bunge and Viterra in Western Canada, as well as less competition between G3 and Viterra. Bunge and Vitera are the two largest buyers of canola. Bunge already operates the largest number of oilseed crush facilities in Canada while Viterra has two crush facilities and several grain elevators in the same region. Combined, they would account for seven of 14 oilseed crush facilities.

In Eastern Canada, there would be less competition in selling canola oil, especially for buyers who cannot receive canola oil by rail. Bunge and Viterra already are two of the three only producers of canola oil at oilseed crush facilities in eastern Canada.

COMPLEMENTARY BUSINESSES

In their joint statement, Bunge and Viterra noted they have "complementary businesses" in several markets and pointed out the Competition Commission did not have specific concerns about buying grain in Eastern Canada and most of Western Canada for certain products. The companies said the concerns involve local purchases of canola in some areas, as well as Bunge's G3 stake.

"We believe the noted concerns are misplaced and look forward to working with Transport Canada and the Bureau to provide further information addressing these points," the companies stated. "We are pleased the regulatory process is advancing and are confident the transaction will yield considerable benefits to Canada. These will include stronger supply chains in uncertain global markets, maintaining Canadian leadership in agriculture and food by increasing capacity to invest and employing thousands of Canadians in well-paying jobs."

Bunge operates in more than 40 countries and owns grain storage and processing assets, including more oilseed crush facilities than any other grain company in Canada.

Viterra operates in 38 countries and has 65 grain elevator licenses in Western Canada provinces. Vitara also operates or holds an interest in ports in British Columbia, Ontario and Quebec.

G3 is a joint venture between Bunge and the Saudi Agricultural and Livestock Investment Co., (SALIC), which was set up to develop new grain-handling and export infrastructure in Canada. G3 operates 20 grain elevators in Canada, as well as port facilities in British Columbia, Ontario and Quebec, and is constructing a new grain terminal in Vancouver, B.C.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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