A large Canadian pulse processing company is trying to quit the business while another looks to expand its asset base.
Legumex Walker has officially put its pulse and special crops processing plants on the market. The plants are located on the Prairies, the U.S. Midwest and Pacific Northwest and China.
“In the second quarter of 2015, the board of directors determined that it was appropriate to consider a sale of its special crops and oilseeds businesses,” the company said in a news release announcing the second quarter financial results.
The assets comprise facilities that used to be owned by the two founding companies — Manitoba’s Roy Legumex and Saskatchewan’s Walker Seeds — as well as assets acquired or built after the formation of Legumex Walker in 2011.
Chuck Penner, pulse and special crops analyst with LeftField Commodity Research, thinks the firm was initially attempting to sell its money-losing Pacific Coast Canola (PCC) crush facility in Warden, Washington.
The company’s canola processing segment posted adjusted earnings before income taxes, depreciation and amortization (EBITDA) of negative $3.6 million for the first six months of 2015
A syndicate of lenders led by AgCountry Farm Credit Services recently demanded repayment of a US$54.6 million loan to PCC by the end of July. The syndicate has since given the company more time to pursue alternative arrangements for the canola plant.
Penner doesn’t think buyers were lined up to buy the crush facility, which is located a long distance from where the commodity is grown in large quantities.
However, Penner believes there will be a long list of suitors for the special crops segment.
“Now that they have signaled that the special crops business is up for sale, I don’t think that part will take that long,” said Penner.
The list of prospective buyers includes Canadian grain companies, Canadian pulse processors wanting to expand and foreign buyers looking for Canadian origination.
However, Larry Weber, analyst with Weber Commodities, thinks the company could have a tough time unloading its pulse and special crops assets.
“I would highly doubt if anybody is going to come to the plate in a short crop year looking to expand their business,” he said.
Weber doesn’t think the plants are well situated. Some of the main pulse processing facilities are located in northern Saskatchewan, where pulse acres have been on the decline and rail freight rates on the rise.
“Anybody that’s looking to expand is building plants themselves, so that’s going to be a tough sell,” he said.
Legumex Walker’s special crops business has three operating divisions:
- The sunflower, flax and bird food division contains primary and secondary processing plants in Winnipeg, Winkler, Man., and St. Jean Baptiste, Man., and a plant in Mentor, Minnesota. Aggregate annual processing capacity is 141,000 tonnes.
- The edible bean division includes primary processing plants in Morden, Man., and Plum Coulee, Man., St. Hilaire, Minn., and Tianjin and Dalian in China. Aggregate annual processing capacity is 106,000 tonnes.
- The pea, lentil and canaryseed division has primary and secondary processing plants in Runciman, Brooksby, Saskatoon and Regina in Saskatchewan and a plant in St. Jean Baptiste, Man. Aggregate annual processing capacity is 275,000 tonnes.
“I really do feel that the special crops side of the business does have some real value,” said Penner, who disclosed that he is a shareholder in Legumex Walker.
However, he thinks the sale is complicated by the canola plant.
One option would be to close the canola facility and sell the processing equipment, said Penner.