Canada-based AGT Food and Ingredients has announced investment from local fund Fairfax Financial Holding, backing the company said would help deleverage its balance sheet.
AGT Food and Ingredients said Fairfax would invest CAD190m (US$130.1m) into the business in exchange for the issuance of 5.375% interest-bearing securities and common share purchase warrants.
The warrants are convertible into approximately 19% of the equity of AGT at a price of CAD33.25 per share. If or when they convert Fairfax will be a holder of that common equity. In the interim, Fairfax is the holder of the interest-bearing preferred security maturing in 99 years.
Fairfax has the right to nominate one independent director to AGT’s board and will become entitled to put forward another director upon the exercise of all of the warrants.
AGT said the proceeds raised from the Fairfax transaction will be used by for “immediate repayment of debt, future growth initiatives and general corporate purposes”.
“Fairfax, with their exceptional track record in global emerging markets is an ideal partner for AGT as we look to grow our business and pursue our long-term goals,” AGT president and CEO Murad Al-Katib insisted.
Al Katib said AGT would work with Fairfax to “explore new strategic growth opportunities”. He added: “The transaction significantly improves our balance sheet by providing attractively priced and near-permanent strategic capital. Management views this as a material de-levering event that equips the company with the necessary liquidity for its current and future growth needs.”
Huseyin Arslan, AGT’s executive chairman, added: “We are focused on building our bulk handling business, transportation and supply chain infrastructure and food ingredient and processing businesses to seize the opportunities for growth that are ahead of us as markets stabilise.”
Paul Rivett, the president of Fairfax, said the fund wanted to help “build a Canadian-based, global champion in the agriculture and food sector”.