By Rod Nickel
WINNIPEG, Manitoba, Feb 25 (Reuters) – Quebec-based La Co-op Federee, one of Canada’s biggest farmer co-operatives, is offering for sale up to 49 percent of pork processor Olymel to help fund expansion in Western Canada, chief executive officer Gaetan Desroches said in an interview on Thursday.
La Co-op would retain control of Olymel, one of Canada’s two big pork processors. The othe is Maple Leaf Foods Inc.
The co-operative, which had C$6 billion in revenue for the year ended Oct. 31 plans to expand hog production in Western Canada to increase processing at its Olymel slaughter plant at Red Deer, Alta., Desroches said.
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The CEO said La Co-op plans to spend $300 million over five years on expanding hog production and becoming a partner in independent stores that sell supplies such as seed and chemicals to farmers. It is also interested in buying feed mills.
Selling a large stake in Olymel would help fund the expansion, which is aimed at competing with U.S. packers such as Tyson Foods Inc and Hormel Foods Corp, Desroches said.
“The goal we have is to increase the chain’s value,” Desroches said. “It’s a co-ordination of every step in production to the customer.”
La Co-op’s search for an Olymel partner comes as some U.S. packers realize some of their highest profit margins ever. Hog supplies have replenished after the PED virus wiped out an estimated eight million hogs since March 2013, while pork demand has been strong.
JBS SA, the world’s largest meat packer, bought Cargill Inc’s U.S. pork assets in October for $1.45 billion.
Olymel had revenues of $2.8 billion last year. By raising more pigs of its own, and also buying hogs from western Canada farmers, La Co-op hopes to boost total production to two million pigs annually, from 1.2 million.
Desroches said La Co-op wants a strategic partner – another company already in the hog business – in Olymel.
He declined to say how much interest he has received.
In December, La Co-op and India partner Indian Farmers Fertiliser Co-operative put on hold plans to build a urea nitrogen plant in Quebec. La Co-op is waiting for nitrogen prices to improve before resuming plans, and a decision would come no sooner than 2017, Desroches said.
La Co-op has no plans to change its structure, including any initial public offering, he said.
