Two family-owned icons of the western Canadian pulse processing sector have merged to become one of the biggest pulse processors in the country.
Roy Legumex Group of Companies of St. Jean Baptiste, Man., and Walker Seeds Ltd. of Tisdale, Sask., have united to form Legumex Walker Inc., a pulse and special crops processor and merchandiser with nine plants in Saskatchewan and Manitoba.
The new entity filed a preliminary prospectus with security regulators last week for an initial public share offering that is expected to raise $70 million.
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Company officials declined comment because of legal concerns surrounding the prospectus, but many details of the new business were unveiled in the document.
Legumex Walker intends to invest $42.1 million of the share offering proceeds in construction of a $109.6 million canola processing plant to be built in Warden, Washington.
The company would own 85 percent of Pacific Coast Canola, a plant that would produce 142,500 tonnes of oil and 227,000 tonnes of meal annually.
The facility would give Legumex Walker a three percent share of North America’s canola crushing industry. The company would have a 1,600 to 2,200 kilometre advantage to its competitors when shipping to food processors on the West Coast or to ports servicing the Pacific Rim.
CHS Inc., North America’s largest farmer co-operative, has signed a five-year deal with Pacific Coast Canola to supply 100 percent of the plant’s seed and to market 100 percent of its meal.
Glencore Grain Investment LLC, one of the world’s largest agricultural commodity trading companies, would own the other 15 percent of the canola crushing facility.
Legumex Walker intends to begin construction within days of completion of its share offering. The plant is expected to be commissioned in late 2012.
The formation of Legumex Walker sets the stage for an intense rivalry with Alliance Grain Traders, a publicly traded western Canadian pulse processing behemoth that also started out as a family business.
“It’s strong competition, very strong competition,” said Lloyd Affleck, a farmer from Beechy, Sask., and former Saskatchewan Pulse Growers chair.
Alliance was contacted for this story but declined comment.
Roy Legumex and Walker Seeds had combined pro forma sales of $288 million and pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) of $15 million in 2010.
During that same period, Alliance recorded adjusted EBITDA of $37.2 million on $642.1 million of sales.
Alliance owns 12 plants in Canada, one in the United States, three in Australia, one in China and eight in Turkey.
Both companies have ambitious plans for growth.
“Management believes that opportunities exist to increase production through the acquisition of additional facilities in the special crops industry as the industry is relatively fragmented and family owned companies with successor issues are common,” said Legumex Walker in its prospectus.
The newly formed company believes the merger allows it to make better use of existing assets. The parent companies had paid $5 million annually to process 31 percent of their sales programs through third party facilities.
“While the company does not expect to completely eliminate the use of third party facilities, management sees the opportunity to increase efficiencies in utilization by shifting processing to company-owned facilities,” said Legumex Walker.
The two companies sold 397,000 tonnes of pulses and special crops in 2010, including 126,000 tonnes of whole green and whole and split red lentils, 124,000 tonnes of whole and split green, yellow and niche peas and 35,000 tonnes of beans to customers in 70 countries.
They bought product from 18,000 farmers, mostly in Canada but also some in the U.S., China and Argentina.
The new company will be headquartered in Winnipeg. Its chair will be Dave Walker, former general manager of Walker Seeds.
The president is Joel Horn, who is also president of HGO, a company that in 2007 bought the crushing assets of Washington Biodiesel LLC, a canola biodiesel firm.
Vice-presidents are Ivan Sabourin, former president of Roy Legumex, and Anthony Kulbacki, former chief financial officer of Walker Seeds.
