WINNIPEG (Reuters) — La Co-op Federee, one of Canada’s biggest farmer co-operatives, is offering to sell up to 49 percent of pork processor Olymel to help fund expansion in Western Canada, chief executive officer Gaetan Desroches said.
La Co-op would retain control of Olymel.
The Quebec co-op, which had $6 billion in revenue last year, plans to expand hog production in Western Canada to increase processing at its Olymel slaughter plant at Red Deer, Desroches said.
La Co-op hopes to boost production to two million pigs a year from 1.2 million by raising more of its own pigs and buying hogs from western Canadian farmers.
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La Co-op plans to spend $300 million over five years expanding hog production and becoming a partner in independent farm supply stores. It is also interested in buying feed mills.
Selling a large stake in Olymel would help fund the expansion, which Desroches said is aimed at competing with U.S. packers such as Tyson Foods.
“The goal we have is to increase the chain’s value,” he said.
“It’s a co-ordination of every step in production to the customer.”
Desroches said La Co-op wants a strategic partner in Olymel that is already in the hog business. He declined to say how much interest he has received.
La Co-op’s search for a partner comes as U.S. packers realize some of their highest profit margins ever. Hog supplies have replenished since the porcine epidemic diarrhea virus wiped out eight million hogs, and pork demand has been strong.
Olymel had revenues of $2.8 billion last year.
In December, La Co-op and Indian Farmers Fertiliser Co-operative of India suspended plans to build a urea nitrogen plant in Quebec. La Co-op is waiting for nitrogen prices to improve before resuming its plans, and a decision would come no sooner than 2017, Desroches said.
La Co-op has no plans to change its structure, including an initial public offering, he added.
