Saudi buys stake in Canadian Wheat Board in $200m deal

By Eliot Beer

- Last updated on GMT

Reaction in Canada has been mixed, with the president of the Grain Growers of Canada welcoming the deal. But opposition politicians have criticised it, saying it undervalues CWB, and is a transfer of key Canadian assets into foreign ownership.
Reaction in Canada has been mixed, with the president of the Grain Growers of Canada welcoming the deal. But opposition politicians have criticised it, saying it undervalues CWB, and is a transfer of key Canadian assets into foreign ownership.

Related tags: Saudi arabia, Canada

Saudi Arabia has bought a stake in Canada’s formerly state-owned wheat buying organisation, the Canadian Wheat Board (CWB), in a US$200m deal.

The purchase will see G3 Global Grain Consortium, a joint venture between US agribusiness giant Bunge and the Saudi Agricultural and Livestock Investment Company (Salic), take on 50.1% of CWB. The remaining 49.9% of the company will be held in trust on behalf of CWB’s member farmers, in line with a previously announced plan.

Saudi food security

Salic, which is the minority partner in the G3 joint venture, has a mandate to invest in agricultural projects around the world, with a view to securing Saudi Arabia’s food supplies. Over recent years Saudi Arabia has moved to a strategy of importing 100% of its grain, in order to preserve its increasingly scarce water reserves​.

G3 considerably strengthens Salic’s position as a global agribusiness investor. The CWB opportunity offers an excellent strategic fit with Salic’s global agribusiness investment plans, and we are extremely happy and proud that G3 has been chosen as the strategic investor in CWB​,” said Abdullah Aldubaikhi, CEO of Salic.

Salic’s chairman, Abdullah Al-Rubaian, said: “Canada is poised to play an increasing role in providing food to a growing world population and in capturing a larger share of the international market demand. Salic is committed to infrastructure investment in countries such as Canada, which are exporters of surplus supplies of high quality grain​.”

CWB is the main buyer for Canadian wheat, and was a monopsony from its foundation in 1935 until 2012, when the Canadian government ended its exclusive purchasing power. Since that decision, the government had been looking for a private sector buyer for CWB, with G3 being among 50 considered as potential buyers, according to the organisation’s CEO, Ian White.

G3’s significant investment in CWB together with the Farmer Equity Plan will create a major new competitor by facilitating the continued expansion of our grain handling network. Creating value for farmers will continue to be at the core of CWB and this plan offers them a unique opportunity to have equity, at no cost to them, in an international grain company,​” said White.

Farmers get equity

Under the terms of the takeover, farmers selling to CWB will gain CA$5 in equity for every tonne of grain they sell to the organisation. After seven years, G3 will have the option to buy farmers’ stakes in CWB, according to Canadian daily paper The Globe And Mail.

Karl Gerrand, CEO of G3, said: “It is a dynamic time for Canadian agriculture. As global demand for agri-products grows, consumers continue to demand the high quality grain produced by our Canadian farmers. Our vision is to establish a highly efficient coast-to-coast Canadian grain enterprise that provides stronger market access solutions for growers and delivers value to our stakeholders and the Canadian agriculture industry as a whole​.”

Reaction in Canada has been mixed, with the president of the Grain Growers of Canada welcoming the deal. But opposition politicians have criticised it, saying it undervalues CWB, and is a transfer of key Canadian assets into foreign ownership.

Several of the oil-rich GCC states have embarked on extensive agricultural investment programmes around the world, most notably Qatar’s Hassad Foods​, which has brought up farms and agricultural companies from Africa and Europe to Australia. Such purchases have often been strongly criticised as “land grabs​”, especially in Africa​.

Related topics: Middle East

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