CWB rejects bid by Saskatchewan group for assets

Investment banker says FNA wasn’t given fair shot
AN offer led by a Saskatchewan group called Farmers of North America to create a farmer-owned entity to acquire the CWB (formerly the Canadian Wheat Board) has been rejected by the CWB.
Although the CWB is not disclosing any information about the process, it is understood it is well along the way toward a privatization transaction, something it was mandated to do by 2017.
Some of the leaders behind the effort by FNA, part of Genesis Grain and Fertilizer Ltd., a grain-handling, marketing and input-distribution business, are angry at the heavy-handed dismissal of the initiative.
“It’s a puzzling decision and a puzzling strategy that makes no sense,” said Bob Friesen, FNA’s vice-president of government relations. “They are rejecting a proposal by farmers for them to build a farmer majority-owned grain company using CWB assets. If another company buys it, they will expect farmers to deliver to CWB anyway.”
An offering memorandum was released two weeks ago with the goal to raise up to $380 million. Friesen said FNA had assembled commitments from about 1,000 farmers for a total of about $50 million. It’s not clear just how much would be required, but Friesen estimated it would be about $250 million to $300 million.
The FNA process was hampered for a number of reasons, including the fact it was trying to raise money from farmers over the past month when they were at their busiest, with a late and difficult harvest.
They were also constrained by what they could disclose to potential farmer investors because of a non-disclosure agreement (NDA). So while FNA officials knew the detailed financial details, they were not included in the offering memorandum.
“If we had more time after harvest to reach out to more farmers, we are totally confident we could increase the number of farmers who have already expressed interest by several times,” Friesen said.
Richard Martin, the spokesman for the CWB, said the government-owned entity would not comment on individual proposals.
With the rejection of the FNA bid, there is some speculation a buyer has already been selected, and some believe it is Archer Daniels Midland Company, the $90-billion per year Chicago-based global food-processing giant.
Jackie Anderson, a spokesman at ADM headquarters said, “As a general rule, we don’t comment on rumours or speculation.”
Another unusual element of the privatization process of CWB is the amount paid by the eventual buyer will not end up in the bank account of the vendor — the federal government — but will remain with the privatized entity to allow it to grow.
Kevin Hooke, an investment banker with Laurentian Bank Securities Inc. who prepared the offering memorandum, believed the FNA was not given a fair shot. Considering it would have created a farmer-owned company, it is doubly galling, he said.
“This was not a typical situation,” Hooke said. “It is a government-owned entity. One could argue that farmers have an entitlement to own it. More importantly, all they had to do was to afford them an opportunity to raise the capital. If, at the end of the day, they could not raise the money, then so be it — sell it to someone else. Remember, though, whoever buys it buys the assets for free.”
Hooke said unlike other bidders such as ADM, the farmer group needed to raise money to do the deal.
“They can’t just write a check,” he said. “The process precluded them from going to the market to do that.”
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.
Dayna Spiring, chief strategy officer with the CWB, was travelling Tuesday and not available for comment, but in a previous interview she told the Free Press the purchase price would become working capital for the CWB.
“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.”