Ceres Global strikes deal to scrap contentious management structure

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Ceres Global Ag Corp., which operates grain storage facilities and a short-line railway in Western Canada, has struck a deal with its major shareholders to scrap a contentious management agreement it had with Front Street Capital and shift to a traditional structure.

The agreement, under which Toronto-based Front Street will be paid $5-million for the early contract termination, follows a proxy battle this summer launched by U.S. activist investor VN Capital.

In late July, investors voted against VN's proposal to scrap Front Street's contract agreement, which it complained was too lucrative for the managers. But investors directed Ceres's board to negotiate a "fair and timely" termination.

On Friday, all the major shareholders lauded the deal, which includes a new slate of directors to be elected at a special meeting set for Sept. 27. Brian Little, Mary Parniak and John Heimbecker will not seek re-election to the board.

The current management agreement with Front Street, which owns 21 per cent of the company, will end on Nov. 30, and monthly management fees at the end of September.

Front Street will get an additional $1-million if the five-day weighted average price of Ceres shares hits $10 within five years, and a further $1-million if it gets to $11, the company said. Shares closed at $7.88 on the Toronto Stock Exchange on Friday.

Michael Detlefsen, who has been Ceres's president, will add the title of chief executive once the new structure is in place. He told The Globe and Mail this week that uncertainty over the outcome of the talks had been holding back some of the company's plans, which include expanding rail and oil shipping capacity in southern Saskatchewan, where it is aiming to start an export business.

The company has already capitalized on the huge increases in oil shipments by train, operating as a partner with Saskatchewan Bakken oil producer Crescent Point Energy Corp.

"I look forward to working closely with the expanded board of directors to continue to develop and execute strategies to deliver maximum value to shareholders," Mr. Detlefsen said in a statement on Friday.