Schneider Corp. plans to own more than half of Mitchell’s Gourmet Foods within the next three months.
But that won’t affect how the company is run, say both Schneider and Mitchell’s officials.
“It gives us a majority position in the company … but it does not affect the makeup of the board (of directors) nor in any way does it affect the management,” said Schneider chief financial officer Gerald Hooper.
In the last financial quarter, Schneider spent $8 million to increase its stake from 38 percent to 43 percent.
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Schneider plans to invest another $21 million in Saskatoon-based Mitchell’s this quarter, taking its stake to 54 percent.
Schneider is not buying outstanding shares from present shareholders. Instead, it is buying newly issued Mitchell’s shares, which will increase the company’s capital base.
Hooper said the new money is being used to expand the Mitchell’s processing plant in Saskatoon. The expansion is expected to be complete in January 2001.
LuAn Mitchell, chair of the Mitchell’s board, said Schneider’s majority stake won’t make Mitchell’s another part of the Schneider Corp.
“This certainly is not a merger or anything of that nature,” said Mitchell.
“It’s a strategy, and I think that’s another key component of any successful business.”
Schneider agreed to invest $35 million in Mitchell’s when it bought into the company in April 1999. The new investments fulfill that obligation.
Schneider’s investment came at a time when Mitchell’s was in rough shape, battered by competition from huge industry players. It was having trouble staying in business and could not afford to expand to remain competitive.
Mitchell said the arrangement with Schneider has allowed the company to expand and increase sales to some of the biggest retailers in Canada.
“It’s worked out well for both of us,” said Mitchell. “We’ve wanted to grow our sales in Eastern Canada and it was to our benefit to be able to piggyback with Schneider through their facilities there, and they’ve wanted to grow theirs in Western Canada.”
Once Schneider owns the majority of Mitchell’s shares, all of the smaller company’s assets, liabilities, sales and expenses will be itemized on Schneider’s financial statements as an integral part of the company.
Schneider now carries its stake in Mitchell’s as an equity investment and declares its earnings from Mitchell’s in a single line item.
