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The largest shareholder in Viterra Inc. (VT-T) urged the company on Tuesday to shake up its board of directors, saying the board is poorly equipped to lead Canada's biggest grain handler.
Alberta Investment Management Corp (AIMCo), which holds 17 percent of Viterra's shares, said the company's recent steps to involve shareholders in changing the board are not sufficient. It said it has been expressing its concerns to management and the board privately for the past 18 months.
"(AIMCo) will not accept Viterra's vague plans for board renewal, further platitudes about seeking shareholder input, or closed-door processes on important governance issues," Chief Executive Leo de Bever said in a written statement.
"...Among these concerns, AIMCo does not believe the current Viterra board has the required skills or expertise to meet the company's leadership needs as a growing international agribusiness."
Despite the criticism, de Bever said AIMCo remains committed to Viterra in the long term.
Viterra acquired ABB Grain of Australia in 2009 with AIMCo's financing, giving the company a second major grain-collection point to offset weather risks in Western Canada.
Viterra earned a net profit of $145 million in 2010, its second-biggest annual profit. So far in 2011 a record South Australian crop has driven up quarterly profits.
Even so, Viterra's shares are little changed from their level two years ago. During the same period, shares declined in U.S.-based grain handler and agribusiness Archer Daniels Midland, while Bunge Ltd stock was flat.
"This comes out of left field -- I wasn't aware this had been brewing," said Jason Zandberg, an analyst at PI Financial Corp who follows the company. "I think their earnings have been pretty good."
AIMCo, the independent investment arm of the Alberta government, has not typically taken on the role of activist shareholder in public. The company manages about $71 billion in assets on behalf of public sector pensions and government endowments.
In a statement, Viterra said AIMCo's announcement is under consideration by its nominating and corporate governance committee.
Analysts see an upside for the company in the Canadian government's move to create an open market for wheat and barley in Western Canada in August 2012, which will allow grain handlers such as Viterra to buy directly from farmers, rather than through the Canadian Wheat Board.
"Any sort of disruptions at the very top leadership level will tend to distract and take the company's eye off the ball," Zandberg said. "Especially right now when you've got moving parts in the grain business with the Canadian Wheat Board (marketing monopoly) dissolving - this is the point where you've got to be strategic about jumping on opportunities."
Viterra, a former farmer co-operative known as Saskatchewan Wheat Pool, went public in 1996.
On Friday, Viterra said it would update shareholders on March 8 of its plan to renew the board. It said two directors would not stand for re-election.