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Few agri-businesses go public

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Published: September 19, 1996

SASKATOON – Of 823 companies listed on the Alberta Stock Exchange, only about a half dozen are agriculturally based.

Small energy and mining companies crowd onto the regional trading body based in Calgary, looking to raise capital and attract shareholders.

But the prairies’ small food processors and farm service operations have not gone the public route.

An explanation might be agriculture’s historical distrust of stock exchanges. Also, investors are not familiar with agricultural companies and their growth strategies.

“For an exchange that has a regional base, we certainly feel the agricultural sector should be better represented,” said Gerry Romanzin, the Alberta Stock Exchange’s executive vice-president.

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XL Foods, a meat packer in Calgary, is co-listed on the Alberta and Toronto exchanges.

James Empey, chief financial officer, said companies go public to spread out ownership base and financial risks, and to get access to more capital.

But attracting interest away from energy and mining companies to agriculture is not easy.

“My experience pounding the pavement in Toronto, talking to potential investors, is that they are more familiar with gold, oil and gas, the things that are all the chatter on Bay Street,” he said. “Cattle or corn, it doesn’t seem as exciting.”

Also, investors look at quarterly profits more than long-term growth plans, he said.

Some agribusinesses that have listed their shares on the Alberta exchange say it has been a good experience.

“It met our goals and then some,” said John Cales, of Humboldt Flour Mills Inc. in Humboldt, Sask.

In the early 1990s, founder Wilf Chamney was nearing retirement and sought a way to sell his interest. He could have sold the operation to another company, but he and the company’s management wanted to keep the head office in Humboldt.

So in 1991, HFM used an Alberta junior capital pool to buy the flour mill and get it on the exchange.

The ASE offered a fairly low cost way of going public – about $100,000, he said.

Several years later, the company attracted the interest of Working Ventures Capital Corp. – a labor-sponsored venture capital operation – to buy Chamney’s shares, allowing him to remove himself completely from the operation.

The liquidity of the shares also helped HFM carry out a $4 million merger with InterWest Ag Service Centres, which operates 11 farm service centres in Saskatchewan.

“We issued shares as part of the transactions and that allowed the people involved to be part of this company. It will create the situation where you have a commitment from them and they won’t be just working for the company.”

TML Foods, a meat processor in Melfort, Sask., also wanted to give existing shareholders a forum to price and sell their equity.

“And in the future, if someone wants to invest in our company, they also have a way out,” said Lorne Thomson, chief executive officer.

In the meantime, being public helped give the company flexibility in building the financing package for a $4 million expansion that tripled the size of the plant, he said. Interest is paid in the form of shares.

The expansion was designed in part to meet the company’s# plan to expand exports to Japan.

Thomson and Cales said going public is not for everyone.

“If you have any hangup about not having 100 percent ownership of the company, you’d better get over it first,” said Thomson.

He believes losing some control to shareholders is a small issue when weighed against the benefits of public ownership and the potential for greater growth.

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