Canada's Competition Bureau said it found major competition concerns around US grains merchant Bunge's proposed acquisition of Glencore-backed Viterra, throwing an obstacle before a global agriculture merger that is unprecedented in dollar value.
The deal would create a company worth $34 billion including debt, nearer in scale to rivals Archer-Daniels-Midland and Cargill.
In a statement accompanying a formal report to Ottawa, the bureau said the deal was "likely to result in substantial anti-competitive effects and a significant loss of rivalry between Viterra and Bunge in agricultural markets in Canada".
It also determined the transaction was to likely to harm competition in markets for grain purchasing in Western Canada, as well as for the sale of canola oil in Eastern Canada.
The two companies said in a joint statement that the bureau's concerns were misplaced and vowed to work with Canadian authorities to provide more information.
The non-binding report was sent to Canada's transport ministry, which has until 2 June this year to review the deal. The minister's office could not immediately comment.
The federal Canadian government will take a final decision.
The Competition Bureau has a mixed record in trying to block deals, including last year its failed attempt to block a C$20-billion merger of telecom firms.
The next steps are for the government to identify any overlapping concerns related to competition and transportation and ask the companies to address them, according to the Competition Bureau's report. Big corporate mergers typically involve the companies remedying competition concerns by divesting some assets to third parties.
If the companies' remedies satisfy the cabinet, it can approve the merger, or approve it with conditions.
The cabinet's deliberations do not follow a set timetable.
Competition Concerns
The bureau also found Bunge could influence the economic behaviour of Saudi-owned G3, a major competitor to Viterra. As a minority shareholder of G3, Bunge has access to confidential competitively sensitive information, the bureau said.
G3 and Viterra operate separate grain-handling terminals in Vancouver, Canada's biggest port, as well as country elevators that buy grain directly from farmers.
G3 does not comment on shareholder matters and is conducting business as usual, spokesperson Peter Chura said.
Bunge, Canada's biggest processor of canola into vegetable oil and meal, would account with Viterra for seven of 14 existing crushing facilities. In Eastern Canada, the companies are two of just three canola oil producers.
The deal would thus reduce competition both in buying canola from farmers in parts of Western Canada and competition for selling canola oil in Eastern Canada, the bureau said.
Bunge, Viterra and G3 account for a combined one-third of Western Canada's elevator capacity.
The two companies reiterated that they expected the transaction to close in the middle of 2024.
"We are pleased the regulatory process is advancing and are confident the transaction will yield considerable benefits to Canada," they said.
Bunge has filed for regulatory approvals for the merger in "major jurisdictions" in North and South America, Europe and China, chief executive officer Greg Heckman said last November.
Bunge shares were flat in New York after Canada released the report.
