Three Companies Make Major Moves in 2009

Viterra, Co-op Life, Alliance Grain

By BRUCE JOHNSTONE

Leader-Post

The good thing about the Top 100 Saskatchewan Companies list is that it shows you exactly how Saskatchewan-based companies stacked up against each other as of Dec. 31, 2008.

What it doesn’t show you is how much things can change in the space of a year or less. Take, for example, three Regina-based companies — Viterra Inc., Cooperators Life Insurance, and Alliance Grain Traders. All three companies embarked on major acquisitions in the past year that have significantly increased the size of the companies since the Top 100 Companies list was compiled. Viterra, of course, was formed from the hostile takeover of Agricore United by Saskatchewan Wheat Pool for $1.8 billion in 2007. The acquisition more than doubled the size of the Regina-based company and vaulted Viterra into first place among Canadian grainhandling

companies.

Not one to let the grass grow under his feet, Viterra CEO Mayo Schmidt announced in May that Viterra had made another major acquisition — this time a friendly one — with ABB Grain Ltd. of Adelaide, Australia.

This $1.4-billion deal marked Viterra’s first major foray into the international marketplace, with most of its acquisitions up to that time being smaller deals for canola plants and feed mills in Canada and the U.S.

More importantly, the acquisition of ABB gives Viterra “dual origination capability’’ — business double-speak for the ability to source grains from two continents to serve the growing Asia-Pacific market.

“As a global food ingredients supplier, our combined company will have access to the largest export origination capability for wheat, canola and barley since Canada and Australia account for 37 per cent of world exports of these crops,’’ Schmidt said in a news release.

“Future demand for core commodities like these is expected to rise 20 per cent over the next 10 years, with much of that increase to come from Asia. The combination enhances Viterra’s access to these key growth markets, while also diversifying production risk.”

Not surprisingly, the acquisition will also substantially increase the size of Viterra in terms of its assets, revenues and net

income.

According to documents posted on Viterra’s website, the combined company will have assets of $6.1 billion, (compared from Viterra’s assets of $4.2 billion as of April 30), combined sales of $8.8 billion (up from $6.8 billion for Viterra alone), and net income of $328 million (versus $288 million for Viterra).

Based on those numbers, Viterra would rank No. 2 in the province in terms of revenues, ahead of Federated Co-operatives Ltd., at $8.4 billion in 2008, assuming all things remain the same (which, of course, they never do).

Unlike Viterra, Co-operators Life is not a company associated with takeovers, hostile or otherwise. But both companies have their roots in the co- operative movement. Saskatchewan Wheat Pool was formed in 1924 as a farmer-owned co-operative, while Co-operators Life was created by SaskPool members about 20 years later.

In 1945, a group of Saskatchewan wheat farmers decided to pool their resources to start an insurance co- operative. In fact, Pool field men often sold Co-op Life insurance policies.

Co-operators Life Insurance Co. is now part of the Guelph, Ont.-based Co-operators Group, which is owned by Canadian co- operatives and credit unions and has assets of more than $7 billion. Last year, Co-operators Life posted a $47-million profit.

Co-operators Life Insurance of Regina and Central 1 Credit Union of Vancouver recently announced an agreement to acquire the CUMIS Group Limited, which provides insurance and other financial products to credit unions and their members, from Madison, Wisc.-based CUNA Mutual Group for

$232 million.

“It does have some implications for Regina because we are a significant player in Regina,” said Garry Herback, vice-president of products and distribution for Co-op Life, which is the second largest company in the Co-operators Group.

Herback said the CUMIS acquisition would increase Co-op Life’s assets from $2.6 billion to $3.2 billion and its revenues from $770 million to $1 billion. The number of employees would increase from 900 to 1,260, he said.

If Co-op Life does join the $1- billion club, it could jump from 11th place on this year’s list to the Top 10 at around the eighth or ninth position (once again assuming everything else remains the same).

Alliance Grain Traders is another Regina-based company that has increased dramatically in size this year, although it may not move up the Top 100 Saskatchewan Companies list next year.

Alliance Grain Traders, the largest value-added processor of pulse crops in the world, was formed from the merger of AgTech Processors and Saskcan Pulse Trading in 2007. That helped boost the company’s revenues from $79 million in 2007 to $329 million in 2008 and profits from $3.7 million in 2007 to $22 million in 2008.

Then, in June, Alliance announced a $104-million deal with its parent company, Arbel Group of Mersin, Turkey, which is one of the top three pulse processors in the world, with $196 million US in annual sales.

The combined company, which owns six pulse crop processing plants in Canada, one in the U.S. and one in Australia, would jump from

$329 million in annual sales to more than $500 million.

“We will be well over half a billion dollars in sales,’’ said Murad Al- Katib, president and CEO of Alliance Grain Traders.

“We’re the largest value-added processor (of pulse crops) and Arbel is the second or third largest in the world. So to put them together … makes a lot of sense.”

Unfortunately, the next spot is the No. 16, which is held by University of Saskatchewan, with $710.5 million in annual revenues. So Alliance may be stuck at No. 16 for a year or two yet.

For a full list of the Top 100, see the pdf of the article.