Canada's worries about Bunge-Viterra deal may force asset sales

By Rod Nickel

WINNIPEG, Manitoba, April 24 (Reuters) - Canada's competition concerns about U.S. agribusiness Bunge's planned takeover of rival Viterra sets the stage for the companies to sell some assets to close the deal, experts said.

Bunge's CEO Greg Heckman said remedies may be unnecessary.

The Competition Bureau in Canada, a major grain and canola exporter, said on Tuesday it was worried about reduced competition to buy farmers' crops in Western Canada and to sell canola oil in Eastern Canada if the deal proceeds. It also flagged as a concern Bunge's minority stake in grain handler G3, a Viterra competitor.

The global agriculture merger is the largest-ever by dollar value, creating a company worth $34 billion including debt. Analysts have said Canada was one of the countries in which the two companies' assets had the most overlap.

The Competition Bureau said Canada will ask the companies to address any overlapping concerns related to competition and transportation. Such remedies often involve selling assets to third parties in sensitive markets.

"These assets are really valuable," said Derek Brewin, an agribusiness professor at the University of Manitoba. "I think there will be competition from any of the Canadian buyers."

Brewin said Bunge may address Canada's concerns by divesting its G3 stake and a Western Canadian crushing plant.

G3 is a "Cadillac export machine," with its four-year-old terminal at Port of Vancouver and modern country grain-handling facilities, Brewin said, adding that canola-crushing facilities would also see strong buying interest.

France-based Louis Dreyfus, which is expanding its Canadian canola-crushing capacity, might be a logical buyer of both assets, Brewin said.

Louis Dreyfus could not be reached for immediate comment.

Richardson International and Cargill also crush canola and compete with Viterra to handle farmers' grain.

ASSET SALES?

Regulators in 13 jurisdictions, including the U.S., the European Union, Brazil and China, have not yet approved the deal, Bunge's Heckman said on Wednesday. But he still expects the transaction to close by the middle of this year.

"We don't really see any need for remedies in Canada. It would be too early to speculate on that, but we look forward to engage on the details," Heckman told analysts on a call to discuss the company's quarterly earnings.

But Ellen Goddard, a professor emerita of agricultural economics at the University of Alberta, said Bunge will likely have to shed assets to gain Canada's approval.

Logical buyers will be those companies whose networks fit best with available assets, but buyers may have leverage to press Bunge to include additional facilities in deals, Goddard said.

The Competition Bureau specifically cited concerns about reduced competition to buy farmers' canola around Bunge's crushing plants in Nipawin, Saskatchewan and Altona, Manitoba. It also worried about reduced competition in selling canola oil in Ontario and Quebec, where Bunge, Viterra and Archer-Daniels-Midland are the only producers.

"They'll go back to the drawing board now," said Murray Fulton, professor emeritus of public policy at the University of Saskatchewan, about the companies. "My guess is they've probably already been working on this." (Reporting by Rod Nickel in Winnipeg, Manitoba; additional reporting by Karl Plume in Chicago; editing by Paul Simao)