The Canada Pension Plan Investment Board was the winning bidder as Switzerland-based commodities giant Glencore sought to sell a chunk of its agricultural assets, including grain company Viterra.
The CPPIB and Glencore announced last week they have reached a deal that will see the CPPIB pay $2.5 billion for a 40 percent stake in Glencore’s ag business.
Viterra was originally formed when the Saskatchewan Wheat Pool took over Agricore United in 2007. Glencore then acquired Viterra — Canada’s largest grain handler at the time — for $6.2 billion in 2012.
So what does this deal mean for Canadian farmers? How will Viterra’s business change, or will it change at all?
“Generally speaking, pension plans, when they make investments, are passive investors. In terms of how the business would operate, I don’t think you would see any difference at all,” says Brian Hayward, president of Aldare Resources.
Hayward served as the CEO of United Grain Growers from 1990 to 2001, when UGG merged with Agricore. He continued to lead Agricore United until it was taken over by the Sask Wheat Pool in 2007 and renamed Viterra.
Pension funds also prefer stable, long-term investments. While both parties are looking for a return, the CPPIB has a longer time horizon than Glencore, notes Hayward.
“They want to invest in businesses that are fundamental, that are very basic, and what’s more basic to people than food? Being located and having infrastructure investments in regions of the world that are proven, that are going to be there for the longer term, that’s right up the alley of a pension plan, so it makes sense that CPP would look at this.”
Interestingly, the amount to be paid by CPPIB in 2016 is based on a 100 percent valuation of Glencore’s ag assets of ~$6.25 billion, almost the same price Glencore paid for Viterra in 2012 — a reflection of how the ag sector has cooled off in the last four years.
“I don’t think you can draw the conclusion that somebody paid too much at a certain point in time or somebody is getting it at a discount now. It’s just how the market moves,” he says.
Check out the interview above for more from Hayward on the CPP/Glencore arrangement, the price paid by CPPIB and what this deal that brings back some Canadian ownership to Viterra means.