A strong quarterly financial result underscores the value of Saskatchewan Wheat Pool’s bid to buy Agricore United, says a market analyst who follows the grain industry.
The Pool last week reported a profit of $7.9 million, or nine cents per share, for the three-month period ending Jan. 31, up from $2.9 million, or four cents per share, a year earlier.
Net earnings for the 12 months ending January 2007 totalled $30 million, compared with $11.3 million for the previous 12 months.
David Newman of National Bank Financial said those strong results provide impetus to the Pool’s effort to take over its larger competitor.
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“The results strengthen the value of the stock as currency, given it reflects strong assets and management, lower financial leverage and greater trading liquidity, improving the relative merits of its bid (for AU) vis-à-vis James Richardson,” Newman wrote in a commentary on the Pool’s results.
AU’s board of directors has rejected the Pool’s bid and recommended that shareholders instead approve a competing friendly offer from James Richardson International.
Asked if he thought the strong financial performance could boost support for the Pool’s bid among AU investors, SWP chief executive officer Mayo Schmidt declined to comment directly.
“I think the results speak for themselves,” he said. “We’ve been showing the strength of our asset base and operating model over the last several years (and) anybody familiar with discussions around our interest in AU can draw their own conclusions.”
He said the results make clear that the Pool is in “great shape for the future” regardless of the outcome of the takeover bid, citing the company’s strong balance sheet, capital structure, operating results and governance and management.
Schmidt said he sees numerous opportunities for growth, apart from the AU bid, including ethanol and farm supply sales.
While the AU-Pool combination is the best option available to create shareholder value and stabilize and strengthen the grain industry, he said, “our entire strategy is not based on one particular event.”
