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Viterra owns grain storage facilities and 232 retail outlets in Canada. (Liam Richards/LIAM RICHARDS/THE CANADIAN PRESS)
Viterra owns grain storage facilities and 232 retail outlets in Canada. (Liam Richards/LIAM RICHARDS/THE CANADIAN PRESS)

Agrium fulfills quest for Viterra stores Add to ...

The stores are scattered across the most productive land in the country. They house bins of bulk fertilizer and sacks of seeds and jugs of chemicals. They are a lifeline to Prairie farmers whose quest for ever-higher yields has made them growing consumers of crop input products.

Now many of those stores are set to fall into the hands of a single company, Agrium Inc. , in a $1.8-billion deal. If it is approved, over the competition concerns of some farmers, the deal will see the Calgary-based company add 232 Viterra outlets to its Canadian stable of 65, giving it roughly a third of the country’s crop input retail business. Agrium will also take 17 Australian stores and a 34 per cent stake in Canadian Fertilizer Ltd., which runs Canada’s largest nitrogen fertilizer plant in Medicine Hat, Alta.

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The deal consummates a quest to bring Viterra’s retail operations into the Agrium fold that stretches back more than a decade. John Van Brunt, the former Agrium chief executive officer, recalls sitting in the office of Viterra CEO Mayo Schmidt in the late 1990s discussing the possibility with Agrium chairman Frank Proto, who still holds that seat. Talks never advanced far, but the idea was as potent then as it is today.

“This is just a natural fit, because right now [Viterra]is in a way a competitor in some places,” Mr. Van Brunt said. Adding those retail outlets creates “an outlet for [Agrium fertilizer]product that’s closer to home.”

Plus, he said, establishing a larger retail presence has long been an aim for a company whose primary fertilizer business is highly bumpy, with most sales happening in spring.

Building up a network of 1,200 global stores, which Agrium had before the Viterra deal, “doesn’t level it out completely, but it certainly has made a big, big difference in cash flow generation over the years,” Mr. Van Brunt said.

Agrium has set a goal of $1-billion in annual earnings before interest, tax, depreciation and amortization for its retail arm; last year, it reached $769-million. The Viterra outlets are expected to add another $100-million, Agrium said.

The deal must still gain approval from Canadian competition authorities, however. The transaction will make Agrium the largest retailer of its kind in Canada, which has stirred some anxiety among farmers who see competition disappearing from local markets.

In Saskatchewan alone, Viterra has retail operations in nearly half of Agrium’s 27 locations, in both major centres like Moose Jaw and Saskatoon and a series of small towns like Canora, Kamsack and Cupar. Some of those locations are located alongside Viterra grain elevators, which will go to Richardson International. But it’s clear there is overlap.

“That is a concern for us,” said Kevin Bender, president of the Western Canadian Wheat Growers Association. “In a lot of areas, Viterra would have provided the competition to Agrium previously. Now [farmers]may not have an option of going anywhere else.”

The Grain Growers of Canada similarly called for the Competition Bureau to scrutinize the deal in areas “where farmers feel there will be less competition.”

Agrium sought to play down competition concerns. “There’s a lot of competition out there already,” said spokesman Richard Downey. “I don’t think there’s a big issue.”

The company, and the Crop Production Services banner that hangs over its retail outlets, does have a solid reputation. “They are a well-run machine with some very, very strong people in their system,” said Reinhard Bachmeier, a board member with the Canadian Association of Agri-Retailers who works for Nexus Ag, an Agrium competitor.

But, he said, “there’s a real, real fear” about ownership concentration. Farmers “don’t want to end up like the general consumer, where all you’re left with is Wal-Mart.”

Follow on Twitter: @nvanderklippe

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