Rite Way is poised to buy the assets of Morris Industries, according to court documents filed May 26.
The sixth report of the monitor, Alvarez and Marsal, said that no acceptable offers had been received as of its previous report, dated May 6.
However, the monitor explored options, including further discussion with bidders who had previously expressed an interest.
“The monitor extensively reviewed its options and the potential interest of those parties that had expressed a continued willingness to enter into a transaction with the company,” said the report.
“On May 22, 2020, as a result of extensive negotiations and multiple communications, the monitor, with the support BMO, executed a non-binding letter of intent for a proposed sale transaction with Superior Farms Solutions Limited Partnership and its general partner, Rite Way Mfg. Co. Ltd.”
The monitor expects an asset purchase agreement by June 19, with the deal to close by June 30.
The documents say the deal is “commercially reasonable in the circumstances” and “represents the highest and best conditional offer received through the SISP.”
Superior has facilities in Imperial, Sask., and Regina and was established as a consolidation platform for short-line equipment manufacturers, according to the document. Rite Way is its operating business, well known for rock pickers, land rollers and harrows.
Golden Opportunities Fund has invested in the business through Superior.
Details of the letter of intent have not been made public. The monitor said disclosing any information to third parties before a binding asset purchase agreement and closed sale could jeopardize efforts to attract future offers under the Companies’ Creditors Arrangement Act process that Morris is operating under.
The monitor asked that the court seal a confidential appendix containing the details.
The Morris Group entered the CCAA process Jan. 8 after cash flow problems largely caused by warranty problems with its Quantum Drill in Australia, where the openers had to be replaced, high inventory and the poor agricultural economy in general.
The court appointed Alvarez and Marsal to monitor the proceedings and a stay of proceedings was later granted until March 27.
The monitor’s powers were expanded Feb. 16 after all of the company directors resigned.
On March 6, the court approved a sale of the assets of Morris Sales and Service Ltd. at Virden, Man.
The court approved another stay on March 27, until May 8, to allow time for a sales and investment solicitation process (SISP).
Subsequent amendments were also granted to allow potential transactions to occur.
However, on May 8 the stay was extended until May 29 “to allow the monitor to continue its various cost saving measures, to increase sales opportunities and to evaluate the timing required by the company to complete a restructuring or to implement a potential sale transaction (whether through a SISP or through other means).”
The May 26 monitor’s report said the company had favourable cash flow of about $1 million during the first three weeks of May and expected positive cash flow of about $10 million until July 3.
It asked the court to grant a fourth stay until July 3 to allow the potential purchase to be completed.