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Saskatchewan said on Friday it wants Ottawa to impose conditions on Swiss-based Glencore's $6.1-billion takeover bid for the country's top grain handler, Viterra Inc. (VT-T), which is headquartered in Saskatchewan.
The federal government must decide whether the foreign takeover is of net benefit to the country. The independent Competition Bureau is also examining Glencore International's plans to sell parts of Viterra to Agrium Inc. (AGU-T) and Richardson International Limited.
The deal would make Glencore, already the world's biggest diversified commodities trader, a major player in grains alongside Cargill Inc., Archer Daniels Midland Co, Bunge Ltd and Louis Dreyfus Corp.
Saskatchewan released a report on Friday that it commissioned from Informa Economics, which highlights both positive and negative implications of the takeover for the province. As a result, Saskatchewan said it will ask Ottawa to impose conditions on Glencore if it decides to approve the deal.
One concern outlined in the report is Glencore's plan to sell most of Viterra's Canadian farm-supply outlets -- which offer seed, chemicals and fertilizer to farmers -- to Agrium, a major nitrogen producer and already the top farm supplier in the United States.
"Glencore has a significant global network that will serve as a market for Saskatchewan farmers and a vehicle for increased economic growth in the province," said Saskatchewan Agriculture Minister Bob Bjornerud. "At the same time, we need to ensure there is no adverse effect on competition in farm inputs."
Saskatchewan also wants Ottawa to ensure Glencore keeps its promise to increase capital spending in Western Canada by $100 million over five years and its promise to make the provincial capital of Regina the headquarters of Glencore's North American agriculture business.
Glencore's $6.1 billion offer for Viterra, which has most of its grain-handling, processing and farm supply operations in Western Canada, and some in South Australia, is the biggest agriculture sector deal in years.
In 2010, Saskatchewan's opposition to a proposed takeover of Potash Corp. by BHP Billiton was seen as key to Ottawa blocking that deal.
The Conservative government should at the very least put in place the conditions Saskatchewan is seeking, said Ralph Goodale, deputy leader of the Opposition Liberal Party.
Agriculture Minister Gerry Ritz could not be immediately reached.
Some critics argue that Ottawa currently has little recourse under its Investment Canada law if foreign acquirers fail to live up to promises they make to win government consent for a deal.
Canada was forced to wade into a legal battle with U.S. Steel Corp to win the right to fine the steelmaker for breaking job-protection promises made when it bought steelmaker Stelco. The two parties settled the matter last December.
Canada is the biggest exporter of canola, spring wheat and oats. The end of the Canadian Wheat Board's monopoly over Western Canada's wheat and barley sales is expected to boost profits for grain handlers, who will be able to buy directly from farmers as of Aug. 1.
The Informa report highlighted Glencore's global marketing reach as a benefit to Canadian farmers and said the deal poses little problem for competition in grain handling, while flagging a concern about Agrium's bigger clout.
"Glencore continues to work within the Investment Canada review process and to pursue regulatory approvals required to complete the transaction, which we believe will be of significant benefit to Canadian farmers and the grains and oilseeds sector generally," Glencore said in a statement.
If the takeover and its side deals go through, the report noted that the fertilizer sector will become more vertically integrated, as Agrium adds 232 of Viterra's farm outlets to its own nitrogen-production capacity, which amounts to more than 50 percent of the country's total.
An Agrium official said under the deal, vertical integration -- or concentration of parts of a single industry -- would decrease, because Viterra is currently the biggest player in both farm inputs and grain handling.
"I find it strange they're saying vertical integration will go up when in fact it will go down," said Agrium spokesman Richard Downey.
Nitrogen, the most widely used fertilizer in Canada, is a globally-priced market, Downey added.
Viterra's shareholders will vote on Swiss-based Glencore's $16.25 a share offer on May 29 at a special meeting in Calgary, Alberta.
The Competition Bureau has already said it will not oppose the takeover, but has not ruled on Glencore's side deals with Agrium and Richardson.