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A Viterra terminal east of Regina (TROY FLEECE/CP)
A Viterra terminal east of Regina (TROY FLEECE/CP)

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Glencore's plans for Regina: Big house on the prairie Add to ...

These are stories Report on Business is following Tuesday, March 20, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Glencore makes plans for Regina Having watched the turmoil of BHP Billiton's failed bid for Potash Corp. of Saskatchewan, Glencore International Inc. is wrapping itself in a prairie flag in its $6.1-billion deal to acquire and break up Viterra Inc. .

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Glencore announced today it reached a deal for Viterra at $16.25 a share, and will sell the bulk of its target's retail business to Agrium Inc. and an almost one-quarter stake in its grainhandling assets to Winnipeg's Richardson International.

Breaking up the company and promising grand things for Saskatchewan, Alberta and Manitoba will help the company when it comes to antitrust and nationalist concerns.

Not only will many assets remain in Canadian hands, but Glencore went out of its way in its statement today to pledge to "consolidate Viterra's executive offices in Saskatchewan and make the Regina head office the platform for its North American agricultural operations and for expansion into the United States."

It promised to be a "strong corporate citizen" in Alberta and Manitoba, as well, pledged to enhance Viterra's charitable initiatives, and announced plans to help fund wheat research in agriculture and education.

Today's deal, which includes a break fee for Glencore of $185-million, is huge for Agrium, as well.

The potash giant said it's paying about $1.2-billion, plus working capital, for 90 per cent of Viterra's Canadian retail outlets and the entire retail business in Australia. Agrium already has more than 1,200 outlets in Canada, Australia, the United States and other countries, though that could pose issues.

"We see the acquisition as a positive for [Agrium]as both Agrium’s and Viterra’s retail businesses operate in both Canada and Australia and their integration could result in synergies," said analyst John Hughes of Desjardins.

"However, [Agrium's]increased market share of the agricultural retail business in western Canada could come under scrutiny by regulators."

Markets slip Concerns over China's economy are on the minds of investors again today.

The mood was soured by a decision in China to raise gas prices again, and by comments from Ian Ashby, the chief of BHP Billiton's iron ore unit, who told reporters in Australia that demand for ore is waning.

"It may be the first day of spring but global financial markets aren’t blooming this morning," said senior economist Jennifer Lee of BMO Nesbitt Burns.

"Effective today, fuel prices in China were raised between 6 per cent to 7 per cent," she added in a research note.

"This is not only the second such move in five weeks, but it is the largest price hike since June 2009 and affects gasoline and diesel."

How do things look?

"The S&P 500 has rallied for 92 days since mid-December with only a 1.2-per-cent correction, suggesting a pause as it approaches our yearend target of 1420," said Ed Solbach of Desjardins.

"While bond yields have also rallied 56 basis points, we note that deeper corrections in the past occurred at much higher yields, when bonds were relatively cheaper. The TSX has lagged the S&P 500 by 13.3 per cent since mid-December, by far the worst relative performance in 10 years."

IATA cuts outlook The industry body for the world's airlines has cut its forecast for profits this year, largely because of higher fuel costs.

The International Air Transport Association said today it now expects airlines to earn $3-billion (U.S.) collectively, down by $500-million.

"2012 continues to be a challenging year for airlines," the group's chief executive officer, Tony Tyler, said in a statement. "The risk of a worsening euro zone crisis has been replaced by an equally toxic risk - rising oil prices."

It could have been worse, IATA said, but for "the avoidance of a significant worsening" of the euro debt crisis, a pickup in the U.S. economy, and more stability in the cargo market.

Fresh take on debt Amid all the fretting over swollen consumer debt comes a different angle from the deputy chief economist at BMO Nesbitt Burns.

Douglas Porter isn't suggesting Canadians load up even more with cheap money, but he does note today that along with household debt, net worth is also climbing.

Just by way of catching up, Canada's debt-to-income ratio is high, and, according to Toronto-Dominion Bank yesterday, set to rise even more to about 160 per cent, the point at which American and British families ran into trouble. As well, Canada's banking regulator is looking at new rules to ensure banks know everything they can about a borrower before approving a mortgage, The Globe and Mail's Tara Perkins and Grant Robertson report.

This comes amid repeated warnings from policy makers that Canadians should get their finances in order before the inevitable rise in emergy-low interest rates.

There is, noted Mr. Porter, something to keep in mind here.

"We have often made the point that much of this debt is being channeled into the purchase of assets, so net worth is still rising - it now stands at a towering 596 per cent of disposable income," he said.

"The most frequent comeback is that the value of assets can come and go (see U.S. housing), but debt 'endures.' But even comparing financial assets to household debt still shows Canadian households overall have a big cushion."

At the end of last year, financial assets in Canada were worth $4.3-trillion, or more than 400 per cent of disposable income, he added.

"That ratio is in line with the 10- and 15-year average, even after a down year for the TSX," Mr. Porter said. "Subtracting household debt leaves a net financial asset ratio to income of 255 per cent."

Canada to speed up approvals The Canadian government has been complaining about the length of time it takes to approve energy projects.

Now, according to Bloomberg News, the Harper government plans to act to speed up environmental approvals.

Finance Minister Jim Flaherty will include fresh measures in his budget next week, the news agency said, citing a source familiar with his plans.

Bloomberg didn't specify what those measures could include, and Mr. Flaherty's department isn't commenting.

The move comes amid controversy over two proposed pipelines, including the Keystone XL line by TransCanada Corp. .

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