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Proposed Glencore Acquisition of Viterra.Pdf Review[Insert of Title] the [Year] Proposed Glencore Acquisition of Viterra and Related Transactions Prepared for: Saskatchewan Ministry of Agriculture Informa Economics Phone: 901.766.4594 May 2012 www.informaecon.com Review of the Proposed Glencore Acquisition of Viterra and Related Transactions Table of Contents I. EXECUTIVE SUMMARY ................................................................................................................................................... 1 A. BACKGROUND AND PURPOSE OF THE STUDY ...................................................................................................................... 1 B. KEY FINDINGS .................................................................................................................................................................. 1 1. Implications for Competition within the Western Canadian Grain-Handling System ................................................... 1 2. Implications for Competition in the Farm Input Sector ................................................................................................ 3 3. Implications for All Aspects of Grain Industry Employment in Saskatchewan ............................................................ 5 4. Implications for Saskatchewan Farmers ..................................................................................................................... 5 5. Implications for Revenues of the Government of Saskatchewan ............................................................................... 7 6. Implications for Saskatchewan’s Strategic Position in the International Grain Industry .............................................. 8 7. Implications for Saskatchewan’s Reputation for a Positive Investment Climate ......................................................... 9 C. SUMMARY OF FINDINGS ................................................................................................................................................... 10 II. INTRODUCTION AND PROPOSED TRANSACTIONS ................................................................................................. 12 A. INTRODUCTION ............................................................................................................................................................... 12 B. BACKGROUND ................................................................................................................................................................ 13 C. PROPOSED TRANSACTIONS ............................................................................................................................................. 14 1. Stage 1: Glencore Cash Purchase of Viterra Shares ............................................................................................... 14 (a) Highlights of the Transaction ............................................................................................................................................. 14 2. Stage 2: Glencore Divestiture of Facilities ................................................................................................................ 16 3. Status of Approvals .................................................................................................................................................. 18 III. GLOBAL BACKGROUND ON MAJOR CROPS GROWN IN SASKATCHEWAN ........................................................ 19 A. WHEAT .......................................................................................................................................................................... 19 1. Global Wheat Situation ............................................................................................................................................. 19 2. Canadian Wheat Situation ........................................................................................................................................ 22 B. BARLEY ......................................................................................................................................................................... 24 1. Global Barley Situation ............................................................................................................................................. 24 2. Canadian Barley Situation ........................................................................................................................................ 27 C. CANOLA ......................................................................................................................................................................... 29 i Review of the Proposed Glencore Acquisition of Viterra and Related Transactions 1. Global Canola Situation ............................................................................................................................................ 29 2. Canadian Canola Situation ....................................................................................................................................... 32 IV. THE CROP SECTOR IN SASKATCHEWAN ................................................................................................................ 35 A. SASKATCHEWAN WHEAT SITUATION................................................................................................................................. 36 B. SASKATCHEWAN BARLEY SITUATION ................................................................................................................................ 39 C. SASKATCHEWAN CANOLA SITUATION ............................................................................................................................... 40 V. THE GLOBAL FERTILIZER INDUSTRY ........................................................................................................................ 42 A. NITROGEN ..................................................................................................................................................................... 42 B. POTASSIUM .................................................................................................................................................................... 45 C. PHOSPHATE ................................................................................................................................................................... 49 VI. THE FERTILIZER INDUSTRY IN SASKATCHEWAN .................................................................................................. 53 VII. PROFILES OF COMPANIES INVOLVED IN THE TRANSACTIONS .......................................................................... 58 A. GLENCORE .................................................................................................................................................................... 58 B. VITERRA ........................................................................................................................................................................ 59 C. RICHARDSON ................................................................................................................................................................. 61 D. AGRIUM ......................................................................................................................................................................... 62 VIII. ANALYSIS OF THE IMPACTS OF THE TRANSACTIONS ........................................................................................ 64 A. COMPETITION WITHIN THE WESTERN CANADIAN GRAIN-HANDLING SYSTEM ........................................................................ 64 1. Grain Storage Capacities Before and After the Transactions ................................................................................... 64 2. Distances to Competing Elevators ............................................................................................................................ 70 3. Company Market Shares by Census Agricultural Regions Before and After the Transactions ................................. 71 4. Additional Considerations ......................................................................................................................................... 83 5. Conclusion Regarding Competition within the Grain-Handling System .................................................................... 83 B. COMPETITION IN THE FARM INPUT SECTOR ....................................................................................................................... 84 1. Retail Farm Input Facilities Before and After the Transactions ................................................................................. 84 2. Wholesale Crop Inputs ............................................................................................................................................. 91 3. Distances to Competing Farm Input Retailers .......................................................................................................... 96 4. Company Shares of Retail Facility Ownership by Census Agricultural Regions Before and After the Transactions 97 5. Potential for Post-Merger Price Increases and Other Anticompetitive Pricing Actions ............................................. 99 ii Review of the Proposed Glencore Acquisition of Viterra and Related Transactions 6. Additional Considerations ......................................................................................................................................
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