G3 sees opportunities to expand in Canadian ag sector

Reuters — A joint venture of a state-owned Saudi Arabian investment firm and U.S. grain trader Bunge is interested in making further investments in Canada’s farm sector after striking a deal to take control of grain handler CWB, the new j.v.’s CEO said Wednesday.

G3 Global Grain Group, a joint venture of Bunge and Saudi Agricultural and Livestock Investment Co. (SALIC), said it will buy a 50.1 per cent stake in CWB for $250 million.

G3 sees opportunities to build modern grain handling facilities in Canada that can help move crops to ports and export markets more efficiently, the company’s CEO Karl Gerrand told Reuters.

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“I would view CWB as just one enterprise,” he said. “I would say it’s a start of building what we envision to be a coast-to-coast Canadian grain enterprise.”

G3 is merging CWB’s network of seven grain elevators in Western Canada and port terminals in Ontario and Quebec with a Bunge export terminal in Quebec City and four elevators in Quebec. CWB, formerly known as the Canadian Wheat Board, also is building four grain-handling facilities in Manitoba and Saskatchewan that will become part of G3.

The company sees an opportunity to add capacity on Canada’s West Coast, but will focus on integrating assets from CWB and Bunge before moving ahead with any projects, said Gerrand. He resigned as managing director of Bunge Canada to lead G3.

“Down the road we’ll look at filling gaps,” he said.

Gerrand’s vision for growth emerged as the CWB deal sparked speculation about the potential for more consolidation in the North American grain industry as traders seek to establish footholds in top-producing markets.

Analysts have long considered U.S. agricultural company The Andersons a prime takeover target because of its diversified assets, including grain storage facilities and rail cars. A company spokeswoman declined to comment on the CWB deal.

Rich Beaven, principal at investment firm Signia Capital Management, said he may invest in Andersons following a recent slide in the stock price. He sold all his shares two years ago when prices climbed.

“It would be a very interesting opportunity for somebody to acquire good market share and good assets at a very reasonable price here,” Beaven said about the potential for a takeover, adding an overseas buyer seemed most likely.

Andersons shares rose 3.3 per cent to US$41.51; Bunge shares gained 1.2 per cent to US$86.95.

Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago.

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