Mayo Schmidt spent his first years at Saskatchewan Wheat Pool cutting debt and chopping off parts of the company so it could stay alive.
But now that he’s done that successfully, and more than doubled the size of the surviving company by taking over Agricore United, the Pool’s chief executive officer says it is time for the grain company to expand again.
“There is a rich environment of opportunities in agriculture right now,” said Schmidt in a news conference to announce his company’s successful purchase of AU.
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“We believe it’s going to continue well into the future. This also allows us to look more robustly at opportunities for North America or even international in scale.”
Although Sask Pool ended up paying more than double what it originally offered to buy its bigger rival, Schmidt said the resulting company will be relatively unburdened by debt.
With debt representing only 32 percent of its capital base, the new as-yet-unnamed company has “really an underleveraged position in the industry.”
Schmidt said a wide array of businesses could give the new company room to grow including biofuel production, farm production supplies and value-added processing.
He also said the new company will be more evenly spread across the Prairies and with about $200 million in cash flow it can afford to take risks other companies might not.
“It also allows us to enter businesses that we normally wouldn’t be able to enter because of the environment of risk,” said Schmidt.
“We are of a capacity that a little mistake isn’t catastrophic.”
The combined Pool-AU will have 104 elevators and handle about 40 percent of prairie grain shipments. Both Cargill and James Richardson International are also becoming larger companies because they are picking up some of the Pool-AU facilities that were sold as part of the merger deal.
Schmidt anticipates grain handling to become more competitive, but he expects his company will show its new strengths in that environment.
“I think we’re going to see the low debt and the powerful engine that the company has on a cash flow basis, I think we’re going to be very competitive in the countryside,” said Schmidt.
“I think it’s going to be a very competitive market.”
Schmidt’s expansion vision comes about a decade after the Pool’s last expansion attempt left it in danger of bankruptcy.
The company built an armada of expensive new concrete grain elevators across the Prairies, and invested in port facilities in Mexico and Poland and in value-added businesses like hog production.
However, the mid-1990s expansion conducted by former CEO Don Loewen ended with drastic downsizing that saw many agriculture related divisions sold.
Schmidt said a team of managers is already planning the Pool-AU integration and an executive team should be announced within 60 days.
The complete corporate integration will take up to 18 months, with most of the work done within 12 months, Schmidt said.
The company has not yet decided where the head office will be located.
There will be some job cuts, Schmidt acknowledged, but he would not estimate the number. However, the companies have many unfilled positions and with plans to expand, job cuts are not his primary focus.
“We don’t see this as a downsizing opportunity. We see it as an opportunity for growth,” said Schmidt.
“We’re looking for businesses to be successful, as opposed to businesses to close.”
