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Grain deal gets DOJ nod
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July 8, 1999: 4:50 p.m. ET
Justice gives go-ahead for Cargill purchase of Continental, with conditions
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NEW YORK (CNNfn) - Agricultural powerhouse Cargill Inc.'s purchase of Continental Grain Co.'s grain business received the nod from the U.S. Justice Department Thursday after Cargill agreed to sell some of its holdings to ensure fair competition among farmers.
Cargill, the biggest privately held company in the U.S., agreed to sell its grain and soybean operations in nine different states in order to gain approval for the acquisition.
The Justice Department had initially blocked the mega-merger because it felt that one buyer rather than two would have forced farmers to receive less money for the crops they produce. "Without the divestitures, many American farmers would have faced lower prices for major crops they produce," said Joel Klein, assistant attorney general responsible for the department's antitrust division.
The Justice Department had also alleged that the Cargill-Continental merger, as it stood, would have created too drastic a concentration of grain elevators owned by one company, reducing competition and leading to higher storage prices for farmers.
What's more, having Cargill and Continental grain elevators along the Illinois River and the Continental port elevator in Chicago under the control of one company rather than two would have tipped the balance of ownership at certain grain delivery points in the Midwest - points that the Chicago Board of Trade relies on to price corn and soybean futures contracts traded in financial markets.
"This concentration would have increased the risk that prices for CBOT corn and soybean futures contracts would be manipulated," the department said.
Under terms of the agreement, Continental will divest four of its port elevators located in Seattle; Beaumont, Texas; Stockton, Calif.; and Chicago. The company will also shed four river elevators located in East Dubuque, Morris and Lockport, Ill., and in Caruthersville, Missouri. It will also drop its Troy, Ohio rail terminal.
New York-based Continental operates a total of six port elevators, 27 river elevators and 14 rail terminals. In 1998 the company posted total revenues of $35 billion and total grain revenues of about $9 billion.
Cargill, meantime, is required to enter a "throughput agreement" to make one-third of its loading capacity at its Havana, Ill., river elevator available for lease or purchase by an independent grain company. The company is prohibited from acquiring a river elevator in Birds Point, Missouri, that Continental had a minority interest and is forbidden to acquire Continental's rail terminal facility in Salinas, Kansas, among other things.
Cargill, based in Minnetonka, Minn., is the biggest grain exporter in the world, with $51.4 billion in sales. It also dabbles in diversified commodities trading, petroleum sales and handles meats and other agricultural products. 
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