Alliance wants to buy CWB
Genesis Grain & Fertilizer seeking to drum up $380M
A farmer business alliance called Farmers of North America is about to formalize a proposal to acquire the Canadian Wheat Board, the former federal Crown corporation.
The Saskatoon-based organization — which claims to represent 10,000 farmers across North America — has formed an enterprise called Genesis Grain & Fertilizer and has been meeting with farmers across the Prairies in town hall gatherings explaining the proposal.
FNA is looking to raise as much as $380 million in an offering to accredited investors, specifically targeting farmers.
One source close to the Saskatoon operation said the release of an offering memorandum was imminent.
It was not released Friday, but FNA material describing the proposal indicated it was seeking a minimum of $10,000 from farmers.
Some say this potential deal — Canadian farmers investing in an entity to own the CWB — is being spurred on, if not encouraged, by various forces because there are other global grain-handling companies that are also about to make offers for the CWB.
“Extensive analysis has been carried out by the FNA business management team, FNA…executive leadership and contracted grain-industry experts, all working with professionals in capital markets and business advisory services,” said some of the voluminous material FNA has prepared. “In order to take advantage of this opportunity, we are setting up a farmer-based limited partnership, which will need a commitment from… 3,000 to 10,000 farmers, each investing $10,000 to $50,000 or more, depending on the size of their production and the average level of investment.”
When the Harper government ended the single-desk monopoly of the old Canadian Wheat Board in August 2012, the new mandate called for Ottawa to continue to fund it for five years, with a privatization plan to be in place by 2016.
Dayna Spiring, chief strategy officer with the CWB, would not comment specifically about a potential FNA offer to purchase, but she did say the CWB is well into the process of producing the privatization plan.
“When we began operating in the open market in 2012, we knew we had to move much faster,” said Spiring. “We have said all along we want to go faster than those dates, and we are looking to do that. We have been readying ourselves for 18 months to get us to a position where we can privatize.”
Officials from FNA were unavailable for comment Friday afternoon, but the group has been blitzing farmers across Manitoba and Saskatchewan this past week. More than 10 meetings were held in Manitoba this week and more are scheduled for next week.
Doug Chorney, president of Keystone Agricultural Producers, was encouraging, but fell far short of endorsing the scheme.
“Our official position is that we think anything that fosters a competitive marketplace for grain buying in Western Canada is good for farmers,” said Chorney. “We wish them all the best. It is a pretty major undertaking. But I admire their determination and tenacity.”
However it may play out, the process by which the CWB would be acquired will be a complicated matter. It’s made slightly more mysterious because its current operations are clouded in a fair amount of secrecy.
The CWB is not disclosing its recent financial performance, nor is it disclosing the extent of capital investment it is making in four high-throughput grain elevators that are under construction in Manitoba and Saskatchewan.
But one of the elements of a potential CWB acquisition that makes it attractive to any would-be suitor is the fact whatever the purchase price ends up being, it will all be available as ongoing working capital and not — as would be the case in most such deals — deposited in the bank account of the vendor.
“The government wants a strong and viable CWB,” Spiring said. “That was their goal when they removed the monopoly. To take away assets or to take a purchase price away would not be consistent with the goal of a strong and viable CWB going forward.”
Sources provided conflicting reports as to whether or not the CWB was encouraging FNA’s proposal. But there are also plenty of rumours that companies such as Louis Dreyfus and ADM are also close to making serious offers.
At least one farmer suggested that’s why FNA is making a big push to farmers now — and why the CWB might be urging interest from Canadian investors — even though many of them are very busy with a late harvest. There is a general desire to maintain Canadian ownership of the CWB assets.
“This is the most inopportune time for farmers to examine the opportunity and look at it,” one farmer said. “To me, you could not pick a worse time if you really wanted farmers to be part of it.”