03/29/2012 11:45 EDT | Updated 05/29/2012 05:12 EDT

Saskatchewan reviews proposed Viterra deal to assess impact on province

REGINA - The Saskatchewan government wants to know how a proposed takeover of grain handler Viterra by a Swiss company will affect the province.

The government announced Thursday that it is reviewing the $6.1-billion deal that would see Viterra (TSX:VT) acquired by Glencore International.

Much of the business would remain in Canadian hands because Calgary-based Agrium Inc. (TSX:AGU) and privately held Richardson International, based in Winnipeg, would buy the majority of Viterra's Canadian assets for a combined $2.6 billion in cash.

Premier Brad Wall said Informa Economics Inc. will report on the implications of the deal for Saskatchewan.

"We'd like this independent group to explore some questions, including what's the impact ... on Saskatchewan farmers? What's the impact in terms of the concentration on the competitive side on farm inputs? What's the impact economically to the province, if any?" said Wall.

The report will also look at grain industry employment in Saskatchewan, competition within the western Canadian grain-handling system and Saskatchewan's strategic position in the international grain industry.

"On the grain-handling side, there appears to be actually a more diffuse market if this takeover happens because of the market concentration the former Viterra had and what's going to be happening with Richardson's or Pioneer elevators, so that part seems to be addressed, but again we're going to do the work," said Wall.

"It's less clear on the input side, certainly with respect to not just fertilizers but the retail presence in rural Saskatchewan and across Western Canada."

Saskatchewan did a similar analysis of BHP Billiton's US$40-billion hostile bid for Potash Corp. (TSX:POT) in 2010.

That study formed the basis of Saskatchewan's opposition to the deal and to the province's recommendation to Ottawa, which decides on such matters. Wall led the charge against that deal, arguing it failed a net-benefit test on all three counts: strategic, fiscal and economic.

The premier said potash, a key crop nutrient found in few places around the globe, was a strategic resource, and Ottawa ultimately rejected the bid.

Wall has said Viterra does not fit Saskatchewan's definition of a strategic resource.

Alberta Investment Management Corp., Viterra's largest shareholder with a 17 per cent stake, as well as Viterra's directors and senior executives have agreed to support the deal. The transaction will require approval by two-thirds of the votes cast at a meeting of Viterra shareholders expected to be held in May.

The premier said it's still important to review the proposed deal even though it's not a hostile takeover.

"We think it's responsible for the provincial government to state its position with respect to the proposed takeover and in order to do that we want to avail ourselves of all the available information."

Glencore has said that it wants to use Viterra to build its business in North America.

Viterra, formed by the merger of the Saskatchewan Wheat Pool and Agricore United, is a grain handler, marketer and food processor with operations across Canada, the United States, Australia, New Zealand and China.

Wall has said it's encouraging that part of the agreement includes keeping Viterra's North American head office in Regina.

The federal Competition Bureau will do its own review, but it's unclear how long that will take.

The province is to get the report from Informa Economics by May 7 and make it public a few days later. However, the government is likely to take some time before it releases its position, Wall said.

"Because of the competition review, this is going to be a longer process than a normal timeline prescribed in the Investment Canada review. I think we're looking at this process continuing over the summer frankly on the competition piece," said Wall.

"There's no real rush and we're not going to rush it. We're going to try to get this right."