Pulse firm looks to sell assets

A major player in Western Canada’s pulse sector says it is open to selling some or all of its assets.

Legumex Walker said its share value does not properly reflect the company’s inherent value, and it is time to explore alternatives, including strategic financing, mergers and sale of all or a portion of the company’s assets.

“We have received inquiries from a number of qualified parties that are interested in exploring various transactions with us in certain of our markets, including the specialty food ingredient market, and we expect that this process will unlock this value and allow the company to fully capitalize on these opportunities,” Legumex chair Bruch Scherr said in a news release.

Legumex operates 15 pulse and special crops processing facilities in Canada, the U.S. Midwest and China.

It also has an 84 percent interest in Pacific Coast Canola, a canola crush facility in Warden, Washington.

The Winnipeg firm posted a loss of $13.1 million for the first nine months of 2014.

A pulse industry observer who re-quested anonymity thinks the company’s struggles are related to its underused crush plant, which is capable of crushing 379,500 tonnes of canola annually.

“That plant has struggled to hit the ground running. There were some questions early on about whether that location made sense,” he said.

The plant is located close to end use markets for the oil and meal, but it is situated a long way from where canola is produced.

Farmers in Washington, Oregon and Idaho planted 97,000 acres of canola in 2014, accounting for less than six percent of the U.S. crop.

So the company has been forced to bring in canola from North Dakota, Alberta and Saskatchewan, which hasn’t proven easy because of disappointing crops and rail transportation problems.

“It’s not like they’re completely down and out, but they could have avoided this I guess if some of those other stars had aligned,” said the industry observer.

He said the competition for canola seed is going to get more intense with a new Bunge plant being built in Fort Saskatchewan, Alta., a new Cargill plant opening in Camrose this summer and an expansion of the Richardson International plant taking place in Lethbridge.

The pulse industry follower believes Legumex got into the canola business as an attempt to diversify and attract investor interest, but the venture has backfired.

“They really don’t want to be left with just the canola crush plant. I think that’s the asset they’d like to get rid of,” he said. “If they can find a buyer for that, then they may hang onto the special crops part of the business and focus on that.”

He thinks there might be some interest in the crush plant from the world’s largest canola customer.

“This would be pure speculation, but a Chinese buyer for a canola crush plant wouldn’t be real weird,” he said.

AGT Food and Ingredients is a possible buyer for the pulse and special crops assets.

The Legumex news release mentioned the company has made a strategic shift into the high-value specialty food ingredient market.

That is a part of the pulse and special crops business that is of huge interest to AGT, which has driven up its share value exponentially by diversifying into the food ingredient manufacturing side of the pulse business.

CWB is in the market for grain industry assets, but the pulse observer thinks Legumex’s pulse processing plants may be too niche for the company’s needs. However, he believes there would be no shortage of U.S. or overseas companies wanting to get a foothold in Western Canada.

Tim Wiens, chair of Saskatchewan Pulse Growers, said his only concern is that growers continue to have the Legumex outlets as delivery options for their crops.

The pulse observer expects the pulse and special crops side of the business to remain intact no matter who owns them.

“That part of the business is sound,” he said. “But if they could get rid of that canola crush plant, that would be a weight off their shoulders.”

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