Mayo Schmidt, Viterra, Top CEO

 

Farmers are known for being proud, and wary of outsiders nosing about their business. Corporate types, let alone American businessmen who get paid millions of dollars in salary and bonuses to play big-money games of greed, are not to be trusted, not when it comes to the Canadian farmer’s way of life and the institutions that protect it.

So it shouldn’t be a surprise that the Kansas-born Mayo Schmidt, with his university education and 20 years of experience in big agriculture companies, was once viewed with outright disdain as the American businessman hell-bent on the destruction of an icon of the Prairies, the Saskatchewan Wheat Pool farmers co-operative.

But if there are some in Saskatchewan who still resent the changes the 52-year-old Schmidt wrought at “the Pool,” they shouldn’t expect an apology. He earned a reputation as a hard-ass along the way, but the tough decisions he made since joining SaskPool in 2000 have now positioned the company—renamed Viterra in 2007—both strategically and financially to take advantage of the growing demand for food exports.

Under Schmidt’s determined leadership, the Regina-based Viterra has emerged as a new global player in agribusiness, with more than 5,000 employees fanned out in offices around the world and estimated fiscal 2009 revenues of $6.8 billion (year-end Oct. 31), up from $1.6 billion in 2006. Upon a foundation of the iconic grain elevators dotting the Prairies, Schmidt has built an emerging empire with diversified interests in fertilizer, seed research, industrial oat milling and livestock feed.

It’s a far cry from January 2000, when Schmidt was recruited to save the SaskPool from itself. Schmidt, now a dual U.S. and Canadian citizen, pulled the farmers’ co-operative back from the financial brink. He recapitalized the business in 2005 by transforming it into a corporation with a single class of shares—ending 81 years as a Prairie grain co-op, the last of its kind—and with steely determination pursued a lengthy but ultimately successful $1.3-billion hostile takeover in 2007 of larger rival Agricore United. This year, the combined company went global, with a well-timed $1.4-billion acquisition in September of ABB Grain, Australia’s largest grain handler.

Today, Schmidt’s job may be all about big business, but he comes by a knowledge of agriculture honestly. He was born and raised on the edge of the small farming community of Hays in northwest Kansas, where his father still runs his family’s heritage farm 12 miles out of town. Steeped in Midwestern values of honesty, integrity and football, Schmidt grew up a natural athlete, going on to play NCAA Division II football as a running back in Washburn University, where he took business, and got invited to a Miami Dolphins training camp. He was signed and played in the 1980 pre-season, but soon returned to Kansas. “I realized that at six feet and 180 pounds, I had more hope for longevity in business than I did lining up as a wide receiver in the NFL.”

Schmidt spent 15 years with General Mills’ agriculture business, getting shunted about to offices all over the U.S., until he left in 1995 to lead Nebraska-based ConAgra Foods’ expansion in Canada, and worked out of the Commodity Exchange Tower at Portage and Main. From that vantage point, he had a good view of SaskPool’s doomed attempts to grow its business, going public in 1996 with a dual-class structure that reserved votes for 70,000 Saskatchewan farmers, and pursuing costly expansion schemes that by the time Schmidt arrived in 2000, had saddled the company with $550 million in debt.

Why did he want the mess? Schmidt saw the larger opportunity. “It was my view that the Saskatchewan Wheat Pool could be the catalyst for the changes that were necessary to make Canadian agriculture a major player in global food markets,” he says. Before he could build it up, he first had to tear it down, divesting businesses—some of them close to the hearts of the board’s 16 farmers, like the weekly Western Producer newspaper and livestock business—and slashing costs, including more than 60% of employees. But expensive debt and drought still almost bankrupted SaskPool, until Schmidt was able to put a plan together in 2005 that swapped debt for equity, raised $150 million, and convinced the farmers, just barely, to relinquish their voting control, turning “the Pool” into just another corporation.

A historic transformation, but Schmidt wasn’t done. Eighteen months later he went after a bigger target: Agricore United. Formed by three other Prairie grain co-ops, Agricore initially dismissed the unsolicited bid from SaskPool, which had about half as much in annual sales, and a six-month battle ensued. In the end, Schmidt got his prize by aggressively pitching investors on his (bang-on) forecast of a commodities boom and the potential cost savings of merging operations, raising $920 million that let him table the $1.2-billion cash offer that finally sealed the deal.

The timing was auspicious. In its 2008 fiscal year, thanks to rising commodity prices, record grain volumes and added cost savings from Agricore, the newly renamed Viterra reaped a bountiful harvest of $288.3 million in net income, up 147% from 2007.

Schmidt has wasted no time using Viterra’s renewed vigour to enact further consolidation, scooping up nine smaller firms in the past two years—and in September, it closed the $1.4-billion acquisition of ABB Grain. The former Australian barley monopoly, which privatized in 1999, opens further channels into China, India and other Asian markets, where demand for basic agriculture products is expected to soar. Expanding to the Southern Hemisphere also allows Viterra to operate with greater diversification in geography as well as products. “Our whole ambition has been to move from a commodity organization to a food ingredient company that provides nutrition,” says Schmidt, citing fertilizer, animal feed, crushing operations for cooking oil, and ABB’s brewery-focused malt business. “That shift has been tremendous for our current stability.” The effects of weather and economic conditions will still buffet Viterra—its margins are down this year with weakening fertilizer prices, for instance—but it’s in a better position to withstand them than ever.

Schmidt isn’t done, either. He makes no secret that as takeover opportunities emerge, he will strike, expanding Viterra’s network around the globe—although big acquisitions are on the back burner until ABB is integrated, and earnings and share price improve.

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