Maple Leaf Foods has agreed to sell its animal nutrition business to Dutch global feed giant Nutreco for $500 million.
The sale includes 18 feed mills owned by Maple Leaf Animal Nutrition, with the exception of two in Manitoba, said Michael Vels, chief financial officer of Maple Leaf Foods Inc.
Maple Leaf’s feed division is operated by Landmark Feeds in Western Canada and Shur-Gain in Eastern Canada and New York state.
Landmark Feeds feed mills in Winnipeg, Otterburne, Man., Rosenort, Man., Medicine Hat, Alta., and Strathmore, Alta., as well as one of two operations in Landmark, Man., were included in the deal.
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Landmark Feeds is keeping two remaining feed mills, one in Souris, Man., and one in Landmark, to produce feed for Maple Leaf’s operations in Western Canada, which are managed by Elite Swine Inc.
Vels said the sale does not affect Maple Leaf’s plans to add a second shift at its Brandon processing plant, which is proceeding as planned.
“We see it as relatively neutral to the hog production industry in Western Canada,” he said.
“We are still going to be a very, very major player. The partnerships that we have in the hog production industry in the region are very valuable to us and certainly we wouldn’t look at giving those up.”
Maple Leaf will continue with its plan to transform its hog production into a 100 percent-owned system that will provide about 20 percent of the hogs required by the Brandon plant. Vels said the rest will come from independent producers.
“We’re keeping two feed mills to feed our own pigs. They will feed our pigs and nothing else. It will be an integrated system designed to provide us with efficient procurement of meat for our value-added operations.”
Maple Leaf Foods is reorganizing its protein value chain operations, which include its animal nutrition, hog production, and fresh and further processed meats operations, to focus on growth in its value added meat, bakery and meals businesses.
The $500 million proceeds of the sale will be reinvested in the new core strategic direction. Vels said the company’s investments in European bakeries have been successful and it might look for more.
“With that type of a (value-added) strategy, managing an animal nutrition company just doesn’t fit. It was a strategic choice as opposed to necessarily a point of view on the feed business. In fact it’s a great business, but it just doesn’t fit the strategy of the company.”
Maple Leaf hopes to complete this process by the end of 2009, significantly increasing earnings and reducing its exposure to underlying currency and commodity influences.
Maple Leaf Animal Nutrition is an independent operating company of Maple Leaf Foods, with sales of $650 million and 2006 earnings before interest and taxes of about $47 million. The company employs more than 1,200 people and operates a research and development facility and 18 feed manufacturing facilities in Canada and New York state.
Nutreco is an animal nutrition and fish feed business, with principal activities including the processing and marketing of a full range of feed and premix products for poultry, hogs, dairy, beef and aquaculture producers. Headquartered in the Netherlands, Nutreco operates 75 production plants in 20 countries and employs 8,000 people. The company had sales of $4.4 billion Cdn in 2006.
