Agricore United has unveiled a plan designed to concentrate its publicly traded shares into fewer hands.
The Winnipeg-based grain handler last week announced a pair of programs designed to assist small shareholders who want to either dispose of or increase their holdings in the company.
“It really is a good opportunity for small shareholders who want to exit economically to do so, and for those who want to stay in it’s an opportunity to buy shares cost effectively,” said David Carefoot, AU’s vice-president of corporate finance and investor relations.
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“Part of the objective of this is to give people a choice.”
AU has about 45.3 million limited voting common shares outstanding, owned by about 100,000 shareholders.
However, 58,000 of those shareholders own fewer than 100 shares, holding an average of 26 shares each.
Carefoot said there have been numerous requests from small investors for assistance in selling the handful of shares they own, since the returns can be eaten up by brokerage fees.
Here’s how the proposed programs will work:
- On Feb. 22, all existing shares will be converted to new shares at a rate of 100 to one. All shareholders who own less than one share following the conversion will receive a cash payment based on the weighted average trading price of the shares during the 10 trading days before Feb. 11. No brokerage fees will apply.
- On Feb. 23, the shares will be split back on a one to 100 basis, thus returning all remaining shareholders to their previous position.
- Under a special “odd lot” purchase program, individuals who own fewer than 100 shares and want to remain shareholders after the consolidation will have until Feb. 9 to buy additional shares to increase their holdings to 100 shares. Again, there will be no brokerage fees.
The proposal must still receive an official go-ahead at the company’s annual meeting Feb. 11, but Carefoot is confident that will happen.
“Given the type of inquiries we’ve received prior to the announcement, there would seem to be broad support among shareholders for an option like this,” he said.
The company will also benefit financially by saving an estimated $300,000 annually in mailing and other costs associated with the large number of small shareholders.
Carefoot said it has yet to be determined how the programs will be financed. If it’s funded through cash or debt, the total number of outstanding shares will decline by up to 1.5 million shares.
If it’s financed by issuing additional shares or private placements to other shareholders, the total number of shares may not change.
