CWB bidding for full ownership of Prairie West Terminal

Western Saskatchewan farmers with shares in grain handler Prairie West Terminal are to vote next month on a $43.23 million cash bid from CWB for the 90 per cent it doesn’t yet own.

CWB, the Winnipeg grain company formerly known as the Canadian Wheat Board, announced Thursday it has entered an “arrangement agreement” with PWT to buy all its remaining common shares at $2,109.23 per share. CWB in January bought a 10.02 per cent stake in PWT. [Related story]

As CWB CEO Ian White put it Thursday, the deal — which would give CWB ownership of five elevators across western Saskatchewan — “represents the first opportunity farmers will have to deliver grain to a CWB-owned elevator.”

PWT’s board is expected to mail a circular to farmer-shareholders on the proposed takeover in “upcoming weeks” for a shareholder vote at a meeting to be held on or about May 30, CWB said.

PWT’s board of directors, who’ve already received financial and legal advice and a “fairness opinion” on CWB’s bid, have “unanimously” agreed the deal is “in the best interests of PWT” and recommend shareholders vote to approve the deal.

Benefits that were considered include PWT’s “long-standing relationship” with CWB, as well as CWB’s access to export markets and its “significant grain marketing experience, which will provide a strong, local competitive option for PWT farm customers.”

PWT’s senior officers and directors have already individually agreed to vote their shares next month in favour of the deal, CWB said Thursday.

At least two thirds of shareholder votes must be cast in favour for the deal to pass at the May meeting. Pending that approval, plus the usual regulatory approvals, CWB said its deal is expected to close in June.

“There are a lot of changes going on in the industry landscape, and this transaction will bring a very experienced marketer of grain to the local market, and ensure the continued success of these facilities and local producers in the years to come,” PWT CEO Chad Campbell said in CWB’s release.

CWB’s bid, he said, “offers shareholders a very attractive return on their investment, and ensures an ongoing, positive presence in our local community.”

“Non-solicitation”

“PWT has a solid reputation with its farmer customers, and in the community at large,” CWB CEO Ian WHite said in the same release. “CWB values farmers in this community and intends to foster the relationships that the organization has built with local farmers and the surrounding community.”

CWB’s arrangement agreement with PWT provides for a “non-solicitation covenant” on the part of PWT, and for CWB to pay a termination fee of $2 million if CWB has to terminate the deal for “certain reasons.”

Under the agreement, CWB reserves the right to match any “superior proposal” for PWT and would get a $2 million termination fee if PWT’s board pulls its recommendation or if PWT makes a deal toward someone else’s “superior proposal.”

PWT was set up in 1998 as a joint venture with grain handler Agricore United (AU, now part of Viterra) to build an inland terminal between Dodsland and Plenty, Sask., about 70 km northeast of Kindersley. AU sold its 50 per cent stake to PWT’s farmer-owned company in 2002.

PWT now includes five locations:

• “the Concrete,” its main terminal on the Canadian Pacific rail line between Dodsland and Plenty, with almost 47,000 tonnes of storage capacity for all commodities, a 112-car rail spot and a crop inputs dealership;
• a 12,420-tonne capacity handling operation, owned by PWT since 2009 at Kindersley, including a wooden elevator and steel bin annex, a 50-car spot and a crop inputs dealership;
• a 7,340-tonne capacity wooden elevator at Plenty, which PWT bought in 2001 and now takes in malting barley exclusively;
• a 5,500-tonne capacity wooden elevator at Dodsland, also bought in 2001 and now handling barley, canola, flax and lentils;
• a wooden elevator with a steel bin annex for total capacity of 6,170 tonnes, bought in 2008 at Luseland, about 75 km north of Kindersley, handling all commodities.

PWT’s sites, which employ over 30 people in total, together move over 420,000 tonnes of grain per year, the company says.

PWT would join a CWB asset base rapidly expanding since the company’s deregulation in 2012. Its handling assets already include Winnipeg-based Mission Terminal — including a Thunder Bay grain terminal, a grain elevator west of Brandon, Man., and stakes in three Prairie producer-car loading facilities and five shortline rail operations — and a St. Lawrence River commodity handling facility, Les Elevateurs des Trois-Rivieres.

CWB more recently announced plans to build a 33,900-tonne capacity high-throughput elevator at Bloom, Man., west of Portage la Prairie, and a 42,000-tonne capacity steel facility at Colonsay, Sask., about 60 km east of Saskatoon. — AGCanada.com Network