WINNIPEG – The final chapter in two prairie pools’ abortive takeover bid of United Grain Growers Ltd. will be written in the next few weeks.
Alberta Wheat Pool and Manitoba Pool Elevators will soon begin selling the roughly 1.88 million UGG shares they acquired last winter in an unsuccessful attempt to buy their rival grain handling company.
UGG announced last week that it is mailing to shareholders its offer to buy up to 3.9 million common shares for $16 per share. The offer expires Sept. 18.
It is part of a deal that will see U.S.-based agricultural giant Archer Daniels Midland acquire a 45 percent ownership stake in UGG for $113 million.
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Officials with the two pools, which jointly own 14.98 percent of UGG’s outstanding common stock, said they will tender their shares to the offer.
“We’ll sell as many as we can,” said Gordon Cummings, chief executive officer of Alberta Pool.
Under UGG’s restructuring plan, shareholders will be able to sell at least 31 percent of their holdings for $16. That percentage could increase, depending on how many shares are put up for sale.
The pools, which bought their shares at prices in the range of $10 to $12, say they’ll sell the rest of their stock as quickly as possible.
“We will obviously not be selling our shares at a fire sale price, but if the price is fair and reasonable and the market is there, we’ll be looking to sell,” said Manitoba Pool chief executive officer Greg Arason.
With the UGG bid officially dead and buried, both pools are again turning their attention to business strategies.
“I expect we will have a definite plan to discuss with our members this fall (at the company’s annual meeting),” said Arason.
But he added there is no sense of panic.
“Manitoba Pool is in good shape,” he said, noting the company will be reporting a significant increase in profits for the year ended July 31, 1997.
The previous year the pool earned $5.5 million, after a provision for $11.7 million in restructuring costs. For 1996-97, net earnings will exceed $16 million, said Arason.
Quiet critics
While one good year doesn’t resolve the issues facing the pool, Arason said he hopes it might quiet critics who say the two smaller pools are poorly managed and no longer viable.
As for Alberta Pool, Cummings said the company will post 1996-97 profits comparable to the previous year’s $28.2 million.
While pleased with those results, he said the pool still has to make changes. The year-end results mean the company can assess the various options from a position of financial strength.
“The fundamentals that were there before (the UGG bid) are there today,” he said. “We still believe we have to look at all options to be ultimately in all three provinces and be bigger than we are.”
On Aug. 20, UGG announced that ADM had bought 4.8 million shares at $16, giving UGG $77.3 million. ADM had earlier bought a $35 million debenture from UGG, which it converted into an additional 2.2 million shares.
UGG is using $66.3 million of the proceeds from those transactions to finance the buy-back from shareholders.
The deal, approved by shareholders at a special meeting July 17, will provide UGG with $50 million in new capital to invest in grain handling infrastructure over the next few years.
