Viterra Inc. is buying a North Dakota durum mill and pasta manufacturer.
Dakota Growers Pasta. Co. of Carrington, N.D., is one of North America’s largest durum mills and the third largest producer and marketer of dry pasta products.
The acquisition was announced at Viterra’s annual shareholders meeting in Calgary March 10.
The boards of Dakota Growers and Viterra approved the sale for $18.28 per share for common shares and 10 cents per share on all outstanding Series D preferred stock of Dakota Growers, said Viterra chief executive officer Mayo Schmidt.
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The transaction is expected to close before the end of April. It is part of an expansion plan to acquire established value-added businesses.
The pasta division at New Hope, Minnesota, sells most of its product through food service and retail markets.
In the early part of this decade, a Saskatchewan-based co-op, Prairie Pasta, tried to sell shares to Canadian farmers to buy into Dakota Growers. The deal would have given delivery rights to Canadian producers, but the deal was complicated by the role of the Canadian Wheat Board and was never completed.
Dakota Growers can mill 1,000 tonnes of grain per day and produce 560 million pounds of pasta annually.
It reported revenues and earnings before interest, taxes, depreciation and amortization of $275 million US and $42 million, respectively, in the year ending Oct. 31, 2009. It has 12 million common shares and 11.3 million shares of Series D preferred stock issued and outstanding.
Schmidt told reporters that Viterra decided to buy an established business rather than build a plant in Canada because it did not want to expand North American capacity.
Market analyst Hari Sambasivam of National Bank Financial said the deal is consistent with Viterra’s stated business strategy.
He estimated the transaction could increase the value of Viterra’s stock by five cents per share on a full year basis.
Larry Neubauer, president of the U.S. Durum Growers Association, said he has concerns about the deal.
“I think it’s a bad deal as far as producers in North Dakota and Montana are concerned,” he said in an interview from his farm at Bottineau, N.D.
He expressed fear that as a Canadian company, Viterra’s main objective will be to maximize sales and movement of Canadian grain.
“I can see a huge influx of Canadian grain coming right into our local marketplace, and with the pricing under the control of a foreign company would assume that would be negative for U.S. producers,” he said.
However Karl Gerrand, Viterra’s senior vice-president for processing, said those fears are unfounded.
“Viterra’s intention is to continue to source durum from farmers in the region,” he said.
“We’ll look to source grain from as close a proximity as possible to the facility and it will be business as usual.”
