June 15, 2007

Canada's Saskpool plans for more expansion after taking over Agricore

Canada's Saskatchewan Wheat Pool (Saskpool) finally bought rival Agricore United yesterday (June 14) to become Canada's largest grain handler, but chief executive Mayo Schmidt said the company plans to grow bigger still.

The acquisition is expected to take 40 percent of Canada's grain market and have the financial capabilities to spread in North America and beyond, Schmidt said.

Saskpool won a six-month bidding war for Agricore in May with a deal worth $20.50 (Canadian dollar) per Agricore common share, or a total of $1.8 billion.

Kansas-born Schmidt, who led ConAgra Foods Inc.'s foray into Canada in the mid-1990s, said the new Saskpool will be able to compete with the grain giants of the world.

The new Saskpool will be able to generate about $200 million in cash flow per year, and is "underleveraged" with a debt ratio of 32 percent.

The increasing demand for grain for food and biofuels also helps the grain handling and crop supply business, Schmidt noted.

Before the acquisition, Saskpool had diversified into a wide variety of highly leveraged "value-added" projects around the world in the mid-1990s which pushed the firm to the brink of bankruptcy by 2003.

Schmidt said the new company is in a stronger position as Agricore stakeholders formally approved the takeover. He will name a new management team to hammer a new structure for the company.

Saskpool shares closed up eight cents at $9.68 on the Toronto Stock Exchange yesterday. 

US$1 = 1.0676 Canadian dollar