Regina, Saskatchewan-based agribusiness cooperative Saskatchewan Wheat Pool (SWP) intends to sell its interest in CanAmera Foods, an oilseed crushing, refining and packaging operation, in which it holds 33.3%.
SWP and Agricore United, who together hold 50%, have signed a binding letter of agreement with the remaining partner, Central Soya of Canada Ltd. that will result in Central Soya becoming the sole owner. The disposition is expected to generate proceeds of about C$59m (US$37m) for SWP.
SWP’s CEO Mayo Schmidt said: “Historically, the majority of CanAmera’s earnings were re-invested in CanAmera and not distributed to its shareholders. This transaction allows us to realise the equity we have built through our minority interest. It also eliminates the impact of earnings swings that can result from canola production declines or changes in world edible oil prices. We have maintained the existing canola supply agreement as well, providing an important marketing option for growers in western Canada.”
The agreement is subject to regulatory approvals in Canada and the US and is expected to close by 31 July 2002.
“With this transaction, we will have raised in excess of C$200m through non-core divestitures to pay down debt and to strengthen our balance sheet,” added Schmidt: “At the same time, we have reduced our requirements for securitization financing by up to C$200m and are on track to exceed this year’s cost reduction target of C$35m.
“We have committed to these important objectives on behalf of our shareholders to improve our financial flexibility and position the company for sustained profitability. We intend to further strengthen the contributions from our core operations, which include strategically located grain handling and marketing facilities supported by a wide range of agri-products and agronomic services, prime export capabilities, fertiliser manufacturing and valued-added production, processing and milling operations.”
Any loss on sale will be dependent upon CanAmera’s earnings to the closing date, however, it is not expected to exceed C$1m on an after-tax basis.