Sells rendering, biodiesel division | The company plans to spend $500 million on meat plants and distribution centres
Maple Leaf Foods is selling its meat rendering and biodiesel business to pay down debt and invest in its prepared meat business.
The company announced late last week that it had sold Rothsay to Darling International, a rendering and food recycling company in Texas, for $645 million.
“The sale of our rendering and biodiesel business supports our strategy to focus on effective capital deployment and profitable growth in the consumer packaged foods market,” Maple Leaf president Michael McCain said in a release.
“We are delighted to have concluded almost a year-long process with an agreement with Darling, the North American leader in food waste recycling.”
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Maple Leaf said leftover cash from the sale, after paying down debt, will be invested in its “consumer packaged food businesses” or returned to shareholders.
Maple Leaf spokesperson Dave Bauer said the capital would help the company remain “acutely focused” on its prepared meat business.
“We’re investing over $500 million in developing a world class prepared meats network that consists of plants and distribution centres,” he said.
“We are doing that to build scale to combat competitive pressures and make sure that we are laser-like focused on innovation.”
Maple Leaf released plans in October 2011 to build a $400 million prepared meats plant in Hamilton, Ont., and additional investments to upgrade existing plants in Winnipeg, Saskatoon and Brampton, Ont.
It also announced that plants in North Battleford, Sask., Kitchener, Ont., Hamilton, Toronto, Moncton, N.B., and the Winnipeg Hot Rod meat stick plant would close.
Al Mussell, a senior research associate with the George Morris Centre in Guelph, Ont., said Maple Leaf’s sale of Rothsay wasn’t shocking.
“I wasn’t entirely surprised (because) I believe Rothsay has been one of the most profitable divisions within Maple Leaf Foods.”
Mussell said the company needs to raise capital to invest in its core business of consumer-packaged foods but can’t sell assets that are connected to an overall strategy.
As a result, selling a profitable division is more lucrative than divesting a money losing enterprise.
Rothsay, a recycler of animal and food products, employs 550 Canadians at six rendering plants in Manitoba, Ontario, Quebec and Nova Scotia. It also has a biodiesel plant in Quebec. It produces pet food ingredients, protein and fat for the aquaculture industry, edible fats for baking and protein for the livestock industry.
Darling International is described on its website as America’s leading provider of rendering and recycling services for the U.S. food industry. It operates dozens of rendering plants in the United States.
