Saskatchewan-based AGT Food and Ingredients Inc. has reached definitive agreement for taking the publicly traded company private, according to a news release. If all conditions are met the deal is expected to go through in the first quarter of 2019.
The company announced Dec. 4 that a buyer group comprised of AGT President and Chief Executive Officer, Murad Al-Katib, and including Fairfax Financial Holdings Limited and Point North Capital Inc. will indirectly acquire all of the issued and outstanding common shares of AGT not already held by the group for C$18.00 per share in cash. The group had initially announced its intention to privatize on July 26, 2018.
“Following a fairly lengthy process to consider the interests of all stakeholders of AGT and the future of the company, the management group, together with the other members of the buyer group, are excited at the prospect of a new chapter of AGT,” said Al-Katib in the news release.
The share purchase price represents a premium of 36.7 per cent above the closing price of AGT’s shares on the TSX on July 26. As of the morning of Dec. 4, the press release said AGT will stop paying any further dividends on its shares, whether or not the privatization is completed.
AGT stock has dropped in value over the past few years. The stock hit a market high in May, 2016 when it was valued at more than C$40 per share. Since then the stock has fallen steadily in value as trade issues have hit the pulse crop market, with India, Canada’s largest pulse buyer, having placed tariffs on pulse imports into the country.
AGT is a pulse and durum buyer, processor and exporter with locations around the world. The company has diversified in recent years by acquiring railways and increasing its food processing divisions. Recently the company also became part of the Arctic Gateway Group consortium which purchased the Port of Churchill and Hudson Bay Railroad.
A special committee reviewed the privatization deal; it received advice from independent financial and legal advisors over the past few months. The committee is unanimously recommending that the board of directors and AGT’s shareholders approve the deal. The transaction will require approval from at least two-thirds of votes cast by all common shareholders. The buyer group represents approximately 17 per cent of shares, according to the July 26 news release.
TD Securities provided the special committee with an updated opinion that as of Dec. 3, 2018 the fair market value of AGT’s common shares is between C$17 and C$21 per share. AGT shares closed at C$15.84 per share on Dec. 3.
AGT shareholders had spoken out against the privatization when it was initially announced. Letko, Brosseau and Associates, a Montreal investment management firm, which supposedly controls about 18.6 per cent of AGT shares, believed the proposal “significantly undervalued” AGT.
“(We) remind the company’s board of directors of its duty to consider the interests of all shareholders in reviewing the merits of this offer,” the firm said in a news release in July.
The deal will be subject to approval from the Ontario courts as well as regulatory approvals in Canada, the United States and certain foreign jurisdictions where AGT operates or owns assets. According to AGT’s website the company operates more than 40 production facilities in Canada, the U.S., Turkey, Australia, China and South Africa.
The privatization agreement prohibits AGT from soliciting competing acquisition proposals. If AGT pursues a superior proposal or changes its recommendation to shareholders with respect to the deal AGT must pay the buyer group a termination fee of C$11.5 million.