Saskatchewan Wheat Pool Inc.

Saskatchewan Wheat Pool Inc.

March 28, 2007 16:27 ET

Pool-Agricore Merger Approved by Competition Bureau- Synergy Estimate Increases

REGINA, SASKATCHEWAN--(CCNMatthews - March 28, 2007) - Saskatchewan Wheat Pool Inc. (TSX:SWP)(TSX:SWP.R)("Pool") is pleased to announce today that it has entered into a consent agreement with the Canadian Competition Bureau, an important milestone in its bid for Agricore United ("Agricore"). To satisfy its obligations under the consent agreement, the Pool and Cargill Limited ("Cargill") have agreed to certain asset transfers. As a result, the Pool now estimates an increase - to approximately $80 million - in the synergies to be achieved by combining the two western Canadian agri-businesses.

In its review of the Pool's offer for Agricore, the Competition Bureau undertook a comprehensive assessment of the competitive landscape in the western Canadian grain handling and marketing, agri-products, and port terminal businesses. To address issues identified by the Bureau, the consent agreement requires the sale by the Pool of nine country grain handling and marketing facilities and one Vancouver port terminal.

President and CEO Mayo Schmidt said, "We have arrived at a comprehensive and final agreement on Canadian competition matters and have come to a favourable resolution for Pool and Agricore stakeholders. We have achieved an important step towards our ultimate objective of merging with Agricore. Only four of the nine elevators that are slated for sale are 100 car loaders, and none of those were designated as key assets in our long-term business plan. Our agreement with the Bureau addresses their requirements by ensuring strong competition. At the same time we believe our solution protects jobs for western Canadian workers. Of particular significance is the fact our revised footprint will allow us to exceed our previously announced synergy estimates."

In conjunction with the consent agreement, the Pool has entered into a definitive purchase and sale agreement with Cargill. Subject to closing conditions, Cargill has agreed to purchase the nine country grain handling and marketing facilities slated for divestiture. Cargill has also agreed to sell to the Pool its 50% ownership interest in the Cascadia Terminal located on Vancouver's south shore and jointly operated with Agricore. Cargill will, in turn, acquire 100% of the Pool's Vancouver port terminal on the north shore. In consideration for the transaction, Cargill has agreed to make an equalization payment to the Pool of $70 million, plus amounts related to inventory held in the country grain handling facilities and other closing adjustments. The Pool will be required to unwind its operating joint venture at the port with James Richardson International. These transactions are subject to the Pool's offers to acquire Agricore being successful.

Cascadia's maximum annual throughput capacity is approximately 6 million metric tonnes (mmt), while the Pool's maximum throughput capacity at the Port of Vancouver is approximately 3 mmt. Should the Pool's proposed merger with Agricore proceed, the Pool will operate 100 per cent of the Cascadia port terminal, together with Pacific Elevators Limited, which has an annual throughput capacity of 2mmt. The Pool and Cargill have also signed a five-year terminal handling agreement under which Cargill will handle, through their newly acquired port facility, up to 700,000 metric tonnes annually of Pool originated products. Cargill will pay the Pool a handling fee for each tonne handled.

After completing the Cargill transaction with the associated terminal exchange and related divestitures, the Pool now believes that approximately $80 million of synergies are achievable by combining the two companies. The Pool originally expected savings of approximately $60 million to be realized equally among its grain, agri-products and services divisions through the elimination of redundancies, implementation of efficiency improvements and reductions in overhead costs. The Pool now expects to achieve an additional $20 million in savings primarily in the grain business. Additional truck, rail and vessel efficiencies are expected and the Pool has identified enhanced margin opportunities that will be achieved by employing its lower-cost operating model throughout the entire infrastructure and maximizing multi-car loading, merchandizing and transportation strategies.

The following Agricore facilities will be sold to Cargill:

Davidson, SK (grain handling/crop input)
Kindersley, SK (grain handling/crop input)
Congress, SK (grain handling/crop input)
Vermilion, AB (grain handling)
Camrose, AB (grain handling/crop input)
Blackie, AB (grain handling)
Viking, AB (grain handling)
Equity, AB (grain handling)
Elva, MB (grain handling/crop input)

Cargill has agreed to offer employment, on terms substantially similar to those currently in place, to all Agricore employees who work at the country elevator locations that will be sold, as well as to employees who work at the Pool's port terminal operation. No changes are anticipated for Cascadia employees.

The Pool will maintain a strong presence in these regions and will offer high quality grain handling, marketing, logistics and agri-product services to farm customers through its expanded and highly efficient operating model.

"The completion of the Competition Bureau review is a crucial step in our strategic expansion to bring two historic companies together to create growth and new opportunities for the long-term sustainability of Prairie agriculture. We have developed a winning solution for Canadian agriculture in what is an increasingly competitive global marketplace," Schmidt said.

Schmidt noted that the proposed merger will broaden the range of product and service choices available to producer customers, bringing together a sophisticated network of facilities, talented knowledgeable staff, and a stronger, more efficient system that ensures the new Canadian company can compete with global leaders. The merger would also see the combination of two highly innovative and complementary research and development programs based in Western Canada that offer top performing seed varieties targeted to the specific needs of Prairie producers.

Should the Pool-Agricore transaction proceed, the Pool will serve over 75,000 farm customers, and operate more than 2 million metric tonnes of storage capacity on the Prairies; nearly 500,000 metric tonnes (mt) of storage capacity at the Vancouver port, 760,000 mt of storage capacity at Thunder Bay, and approximately 300 agri-products locations.

Saskatchewan Wheat Pool Inc. is a publicly traded agribusiness headquartered in Regina, Saskatchewan. Anchored by a Prairie-wide grain handling and agri-products marketing network, the Pool channels Prairie production to end-use markets in North America and around the world. These operations are complemented by value-added businesses and strategic alliances, which allow the Pool to leverage its pivotal position between Prairie farmers and destination customers. The Pool's common shares are listed on the Toronto Stock Exchange under the symbol SWP and its subscription receipts are listed under the symbol SWP.R.

Forward Looking Information

This release contains forward looking statements that involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such statements. Important factors that could affect these statements include, without limitation, weather conditions; producer's decisions regarding total planted acreage, crop selection, and utilization levels of farm inputs such as fertilizers and pesticides; Canadian grain export levels; changes in government policy and transportation deregulation; world agricultural commodity prices and markets; changes in competitive forces including pricing pressures; and global political and economic conditions, including grain subsidy actions of the United States and European Union.

Contact Information

  • Kingsdale Shareholder Services Inc.
    Shareholder contact
    Toll-free at 1-866-301-3454
    Saskatchewan Wheat Pool Inc.
    Susan Cline
    Media contact
    (306) 569-6948