A merger creating North America’s largest lentil exporting company is complete.
Agtech Income Fund has acquired Saskcan Pulse Trading Inc., in a deal worth $23.2 million. The new entity will be half owned by the public and half by the original shareholders of Saskcan and Agtech.
Both companies will continue to operate as separate firms, contracting with their own group of farmers, dealing with their own buyers and selling product under their own brand names.
“Really it’s business as usual in terms of day to day. But what it has done is solidified our balance sheet,” said Saskcan president Murad Al-Katib.
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The amalgamated company, known as Alliance Pulse Processors, has plenty of new equity and zero debt.
“We’re now ready to continue on with our growth, expansion and acquisition strategy for North America,” said Al-Katib.
On paper Agtech took over the assets of Saskcan, but in reality the merger was driven by Saskcan, a large Regina-based lentil splitting firm that was looking for an easy route to become a publicly traded company and found it in Agtech, a small Regina pulse processor listed on the Toronto Stock Exchange.
Saskcan shareholders will own 40 percent of Alliance, Agtech shareholders 10 percent of the firm and the remainder of the company will be in the public’s hands.
Alliance operates five pulse processing plants, including the newly acquired Missouri River Ag Processing facility in Williston, North Dakota. Combined, the facilities represent 440,000 tonnes in annual processing capacity and will account for 30 percent of Canadian lentil exports in 2007-08.
According to Al-Katib, that is only the foundation of what he hopes will become the world’s largest pulse processing company.
“We’ll definitely be keeping our eye open for good partners and good acquisitions,” he said.
Garth Patterson, executive director of Saskatchewan Pulse Growers, said the deal doesn’t raise any red flags from a grower perspective.
“There is plenty of competition for lentil growers here. I certainly wouldn’t express any concern,” he said.
“(Consolidation) is not unique to the pulse industry or the grains industry,” said Patterson.
Agtech shares that were selling for $4.65 at the time of the merger announcement were trading at $6.35 last week. The company oversold its $14 million share offering by 40 percent.
“It was a bit difficult to tell interested investors that they weren’t going to get their full allocation, but that’s a very good problem to have,” said Al-Katib.
Shareholders of Saskcan, which include Al-Katib and the Arslan family of Turkey, converted their entire position in Saskcan into Agtech shares and injected fresh capital into the project by buying a substantial volume of shares at the same $5.40 price offered to the public.
“It shows our absolute confidence in this transaction,” said Al-Katib.
At the current share price the company is valued at more than $35 million. Al-Katib said they are looking forward to processing and selling what looks to be a smaller-than-expected but excellent quality 2006-07 pea and lentil crop.
Prices are way up over last year’s levels. Red lentils are selling for 22 cents per pound compared to 10.5 cents a year ago. There are 20 cent bids in the country for green lentils compared to 14 cents last year, while yellow peas are fetching $6 per bushel today compared to $3.50 in 2006.
“We see a very significant opportunity, especially until the Australian new crop comes in, in November, December,” said Al-Katib.
