MARTENSVILLE, Sask. – Saskatchewan Wheat Pool seized the opportunity during the opening of Can-Oat Milling’s new oat processing plant in this community north of Saskatoon to announce it is buying sole control of the Manitoba company.
Sask Pool bought Can-Oat, Canada’s largest oat processor, in a share swap and cash deal worth $62 million, from former majority owners Arthur Block, A.R. Holdings, Can-Oat Holdings B.C. Ltd., Manitoba Pool Elevators and private investors.
The sale increases the pool’s ownership in the Portage la Prairie-based company to 100 percent from 34 percent.
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In total, $12.8 million in cash and 2,335,835 class B, non-voting shares were exchanged.
Don Loewen, the pool’s chief executive officer, said institutional and other large stock market investors favor companies that control their own future. These investors discount share values in companies that hold minority interests in other companies.
So in agricultural processing, the pool will be “master of our own destiny.”
Also, complete ownership eliminates surprises.
“It is important to be in a position where all of a sudden you don’t find yourself with a new partner,” Loewen said.
Bill Hunt, executive vice-president of the pool’s food and industrial group that will operate Can-Oat, said it may also be a return to the roots of the organization.
“This is nothing new for the pool. In our not too distant history we owned all of our operations. This is a return to some of that type of control … . It should contribute to the value of our class B shares,” he said.
Loewen said Sask Pool has been looking at other food processing areas of the company where it does not have total ownership, including Fletchers Fine Foods. The pool holds 43 percent of the Red Deer, Alta.-based pork processor.
“We have made no secret about our intentions towards Fletchers,” said Loewen.
Arthur Block, founder and chair of the Can-Oat board, said the time had come for a change of ownership.
“Can-Oat needed a parent of this size. There are major opportunities for us after this expansion but it is necessary to have the capital that only a larger company could provide,” said Block, who will stay with Can-Oat during the transition.
Loewen said a good market outlook makes this a good time to increase oat production and processing in Canada. As well, oat production in the United States is falling.
The announcement came during the grand opening of the latest Can-Oat expansion. Converted from a Sask Pool high volume grain elevator, the $20 million expansion created a primary oat processing facility known as a groating mill. The mill is expected to consume 165,000 tonnes of oats producing 100,000 tonnes of finished product each year.
The new plant produces groats and hulled oats for industrial markets, including bakery products and breakfast cereals, and plans to ship some product to the Portage plant for rolling and flour production. Hulls will be sold into local livestock feed markets.
“We should be able to produce 175,000 tonnes of finished product between the two plants, said Trevor Pizzey, Can-Oat operations manager.
In 1997 Can-Oat’s sales were 64 percent in the U.S., 26 percent in South America and the Caribbean and five percent in Mexico and five percent in Canada.
