Competition Bureau statement regarding the acquisition of WendlandAg’s agri-product retail locations by CPS

OTTAWA, May 2, 2016 — On May 2, 2016, the Competition Bureau announced that, following a review of Crop Production Services (Canada) Inc. (CPS)’s proposed acquisition of WendlandAg Services Ltd. (Wendland)’s six agri‑product retail stores, it has reached an agreement with CPS that preserves competition for the sale of nitrogen fertilizers in Saskatchewan. The Consent Agreement has been filed with the Competition Tribunal on April 29, 2016.

This statement summarizes the approachFootnote 1 taken by the Competition Bureau in its review of the proposed transaction.

Background

CPS is proposing to buy substantially all the assets of Wendland associated with its six agri‑product retail stores in Saskatchewan located in Domremy, Rosthern, Waldheim, Blaine Lake, Delmas, and Cut Knife, as well as an administrative office in Saskatoon.

CPS, a subsidiary of Agrium Inc. (Agrium), and Wendland both operate retail stores in Saskatchewan that sell crop inputs to farmers including urea and anhydrous ammonia (two forms of nitrogen fertilizer), as well as seeds, crop protection products, and other fertilizers.

Under the terms of the Consent Agreement, CPS must divest the Wendland agri‑product retail location in Rosthern, SK and CPS‑owned anhydrous ammonia tanks located in Leask, SK and Hoey, SK. CPS has also agreed to supply anhydrous ammonia to any purchaser of the divested assets for up to two years at prices not to exceed those charged to its retail outlets in Saskatchewan, at purchaser’s option.

The proposed transaction is notifiable under the Bureau’s pre-merger notification threshold. It is also notifiable due to provisions in a 2013 Consent Agreement entered into with Agrium as a result of its purchase of a number of agri-product retail stores from Viterra Inc. (Viterra). That Consent Agreement requires that Agrium (and as a result, CPS) notify the Bureau of any acquisitions within 35 km of any divested retail locations or anhydrous ammonia businesses for a period of three years; Wendland’s retail locations in Delmas, SK and Domremy, SK were located within 35 km of assets that had been divested under the 2013 Consent Agreement.

In the course of its review, the Bureau conducted interviews with numerous market participants including farmers in Saskatchewan and competing agri‑product retailers; reviewed documents and information provided by the parties and third parties; and analyzed industry financial and transaction level data.

Analysis

The Bureau found that Wendland and CPS competed against each other to provide crop inputs to farmers in the areas around each of the Wendland retail locations.

As it did in its review of Agrium’s purchase of Viterra’s agri‑product retail facilities in 2013, the Bureau’s review focused on the local retail supply of urea and anhydrous ammonia to farmers.

The Bureau reviewed the competitive dynamics in each of the markets around the Wendland retail locations. Using sales information obtained from parties and third party competitors, the Bureau identified a number of markets with high concentration. Market contacts were conducted with customers and competitors in each of these local markets to assess the competitive landscape and potential effects of the proposed transaction.

The Bureau concluded that the proposed transaction would lead to a substantial lessening or prevention of competition in the retail supply of urea or anhydrous ammonia in a number of local markets in Saskatchewan. The Bureau believes that the Consent Agreement entered into with CPS to divest one retail store and two stand‑alone anhydrous ammonia assets resolves these concerns.

With regard to the divestiture of the anhydrous ammonia assets, a form of remedy the Bureau also agreed to in the 2013 Consent Agreement, market contacts emphasized that it was important for an agri‑product retailer to be able to provide additional products, beyond anhydrous ammonia, so they can compete effectively with other retailers. As a result, when determining whether to approve a proposed purchaser, the Commissioner will take into account the likely competitive impact of the divestiture on competition, which may include whether the proposed purchaser of a divested anhydrous ammonia tank has effective complementary retail facilities nearby.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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