Winnipeg-based special crops marketing company Legumex Walker Inc. has signed a deal to sell its special crops business to The Scoular Company.
With its Pacific Coast Canola plant in financial trouble, Legumex Walker announced in March it had formed a committee to explore options for selling all or part of the company, possibly including its primary business of processing food and feed ingredients from sunflowers, flax, canary seed, lentils, peas, beans and chickpeas.
Scoular, which has its head office in Minneapolis, has agreed to acquire all of the assets of LWI’s Special Crops Division for C$94 million plus the amount of net working capital at closing, on a cash free, debt free basis. The sale represents a C$174.6 million transaction value for LWI, based on LWI’s working capital on June 30.
“Following careful review of the transaction by the Special Committee in consultation with our external financial and legal advisors, we believe this transaction represents excellent value and is in the best interests of LWI shareholders,” said Bruce Scherr, Chairman of the Board of Directors of Legumex Walker, in an update on September 14.
Formed in 1892, U.S.-based Scoular had nearly $6 billion in sales in 2014, employing more than 850 people at over 90 facilities around the world. Adding more than a dozen LWI facilities in Manitoba, Saskatchewan, Minnesota and North Dakota will significantly expand Scoular’s crop logistics footprint in Western Canada and the Northern Plains.
Bob Ludington, Scoular’s Chief Operating Officer, said they “expect to operate Scoular Special Crops much like LWI operates the business today, but with the financial capacity to expand operations, product lines, and distribution channels. As a result, we will be able to provide additional value to Canadian producers and pursue opportunities to serve a global customer base seeking specialty products associated with healthy food trends.”
While LWI’s Board of Directors has unanimously approved the deal, it must still receive approval from two-thirds of LWI’s shareholders. A shareholder vote is scheduled for November 9. The transaction is also subject to regulatory approval.
As for LWI’s troubled canola plant in Washington, the company has entered into a non-binding term sheet regarding a possible transaction of its 84 percent ownership stake in Pacific Coast Canola. LWI says it currently believes it will complete the PCC transaction before the shareholder vote on November 9, but it does not expect to receive any value from the sale.
If the sale of LWI’s special crops division and the PCC transaction go ahead, the company formed by the merger of Roy Legumex and Walker Seeds in 2011 would wind up its operations and return the net proceeds to shareholders. Acknowledging there are no guarantees, the company says it currently expects that after repayment of all debts, the per share payment would be in the range of $2.50 to $2.75.
LWI’s shares would likely be delisted from the Toronto Stock Exchange within a month of court approval of a plan for liquidation.