Ag Growth Industries Inc., a junior capital pool traded on the Alberta Stock Exchange, announced last week that it intends to buy Wheatheart Hydrostatic and Machine of Saskatoon for $5.7 million, plus the costs of its inventory.
Wheatheart designs and builds bin sweeps, auger transports, post pounders and post hole augers.
Last December, Ag Growth bought Swift Current belt loader company Batco Manufacturing Ltd.
David Quick, of Wheatheart, said the relationship with Batco goes back a long way.
“My dad first worked with Art Stenson (president and founder of Batco Industries) years ago. Becoming part of the same company doesn’t seem so unusual. We’ve always ended up working with each other or right beside each other or at every trade show we attend. We liked the idea of keeping the company held in Saskatchewan and with people we know,” Quick said.
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Ag Growth is the new name of Batco’s parent company.
Rob and Art Stenson, founders and operators of Batco, wanted to expand their business, but believed they could not succeed by debt financing alone.
With help from venture capitalists and using Alberta Stock Exchange rules designed to help small companies, they became involved with a junior capital company called Ultra Capital. Junior capital pools are companies listed on the exchange with money, but no operating arm. They have 18 months to buy an operating company.
In the summer of 1997, Ultra Capital bought Batco in what is called a reverse takeover. Part of the deal was to issue enough shares to the Stensons for them to take control of Ultra Capital.
In December, Ultra Capital changed its name to Ag Growth Industries and in a week or so it will be listed on the ASE under the letters AGX.
Rob Stenson, Ag Growth president, said in the future the company will be able to issue shares and sell them to raise money.
Joining companies will make them stronger by increasing purchasing power and broadening equipment lines, he said.
“The sum will be more than the parts.”
Although there are benefits in being part of a larger company, Batco and Wheatheart will operate separately.
“They are both profitable enterprises and there is no need to change the relationship,” said Gary Anderson, general manager of Batco.
The Wheatheart deal also solved a problem that faces many family owned or limited partner companies. How do some owners retire or leave a business without causing remaining partners or the company to incur new debt to buy out those who wish to exit?
“Selling a company like ours is not an easy thing to do. We aren’t the kind of business that can bring a price that represents what we’re worth. It’s more than just the land and buildings,” said Quick.
The deal will include $1 million in debt financing by CUCORP, a division of Credit Union Central of Saskatchewan, share exchanges in Ag Growth and the issue of one million share purchase warrants to Wheatheart. It is expected to wrapped up by the closing date for acquisition on April 30.
