Saskatchewan Wheat Pool has signed a share purchase agreement to sell its 3,381,182 shares in Premium Brands Inc. (TSE:fff) which represents an ownership position of approximately 41 per cent. “This is consistent with our stated objective to divest of non-core assets and focus on the Pool’s strengths of grain handling, agri-products marketing and value-added businesses that leverage our pivotal position between Prairie farmers and destination customers,” says Chief Executive Officer, Mayo Schmidt.
Under the transaction, the majority of the Pool’s shares in Premium Brands will be repurchased by Premium Brands. In addition, Raymond James Ltd., a full service investment dealer and financial advisor to Premium Brands, will purchase 292,099 of the Pool’s shares in Premium Brands for $4 million. The remaining shares of Premium Brands held by the Pool are to be sold to the public pursuant to a secondary offering in conjunction with a treasury offering by Premium Brands. In total, the Pool expects to receive $46.3 million with proceeds used to pay down debt.
The transaction is subject to a number of closing conditions, including regulatory approvals and the approval of the shareholders of Premium. Additionally, the sale is subject to the success of Premium’s treasury offering and the Pool’s secondary offering, the ability of Premium to access the necessary debt financing, and an amalgamation involving certain subsidiaries of Premium Brands.
“If all closing conditions are met, the Pool will record an accounting loss against fourth quarter earnings of approximately $20 million or $0.53 per share,” says Schmidt. “More importantly, however, is the $46.3 million in proceeds which the Pool will apply against its debt. Debt reduction is a primary component of our business plan, and this initiative illustrates our commitment to that plan.”
In addition to the sale of its shares, the Pool will enter into a consulting agreement with Premium Brands upon closing of the share purchase agreement and will receive annual fees of $1 million payable in each of the next three years. The Pool also retains its long-term hog supply agreement with Olymel, which recently purchased Premium Brands’ Red Deer slaughtering operation. “By developing long-term supply agreements and strategic partnerships, the Pool expands market opportunities for Prairie production while reducing our cost of doing business,” Schmidt says.
Saskatchewan Wheat Pool is a publicly traded agri-business co-operative headquartered in Regina, Saskatchewan. Anchored by a prairie-wide grain handling and agri-products marketing network, the Pool channels prairie production to end-use markets in North American and around the world. These core business operations are complemented by food processing and value added businesses that allow the Pool to leverage its pivotal position between prairie farmers and destination customers. The Pool’s Class B shares are listed on the Toronto Stock Exchange under the symbol SWP.B.
