Grain bin manufacturer Westeel is on deck to become part of Prairie grain handling equipment company Ag Growth International’s bin of manufacturers.
Winnipeg-based AGI announced Tuesday it’s signed an acquisition deal with Westeel’s owner Vicwest Inc. and Irish building materials manufacturer Kingspan Group. Kingspan said Tuesday it will buy Winnipeg-based Vicwest for $12.70 cash per share, pegging the enterprise value of Vicwest at about $350 million.
A condition of Kingspan’s deal, however, is the sale of Vicwest’s Westeel division to AGI for $221.5 million cash. Kingspan would keep Vicwest’s separate Vicwest Building Products division, which makes several brands of metal cladding and roofing for the residential, commercial and farm sectors.
The $221.5 million aggregate purchase price puts an enterprise value of about $210 million on Westeel. AGI will also buy another $11.5 million in Westeel assets at closing, including a Westeel plant that’s been put up for sale in Regina.
From AGI’s viewpoint, the Westeel deal “will add an iconic Canadian brand of grain storage to AGI’s already impressive stable of leading manufacturers of grain handling and conditioning equipment, including Westfield, Hi Roller, Tramco and Batco,” AGI CEO Gary Anderson said in a release.
Westeel, he said, “provides a complementary product offering to expand our growth platform within North America and around the world.”
Westeel makes grain bins at Winnipeg and Saskatoon and petroleum storage tanks at Olds, Alta. and Tisdale, Sask., and runs distribution centres at St-Simon-de-Bagot, Que., Fargo, N.D., Saskatoon and Winnipeg.
Last year Westeel also bought Italian grain handling equipment maker PTM Technology and struck a deal with another Manitoba company, Norstar Industries, to make new lines of Magnum smooth-wall bins.
“Scale to compete”
AGI’s group of manufacturers already includes Twister and Grain Guard, two manufacturers of hopper-bottom and flat-bottom bins — but AGI said Tuesday it considers Westeel’s business to be “highly complementary” to the AGI product lines.
Westeel, AGI said, offers products “not currently part of AGI’s catalogue, including smoothwall bins, hopper cones and commercial hopper-bottom bins, which expand AGI’s seed and fertilizer catalogue.”
Westeel’s export focus on Europe, the Middle East, North Africa and India also generally complements AGI’s own focus on Eastern Europe, Latin America, Southeast Asia and Australia, AGI said.
Bringing Westeel into AGI also “provides the scale to compete against large, global peers,” AGI added.
Vicwest CEO Colin Osborne said Tuesday the company’s board found running both the construction business and agricultural business under one umbrella “is no longer the ideal structure for the long term,” given what he described as “the evolution of both businesses into new product lines and markets.”
On top of the usual regulatory and court approvals, Vicwest shareholders still have to vote on the deals, at a special meeting expected to be held in January. Vicwest’s board members and company officers have already committed to vote in favour. The sales to Kingspan and AGI are “inter-conditional,” Vicwest added.
It’s not yet known what the deal with AGI — whose divisions in Canada, the U.S. and overseas also make grain augers, belt conveyors, handling accessories, aeration equipment and drying systems — will mean for Westeel’s previous “strategic alliance” with another Winnipeg manufacturer.
Westeel and Buhler Industries in 2010 reached a deal to sell Buhler-made, Westeel-branded grain handling equipment through Westeel’s Canadian distribution chain. Buhler’s Farm King division, as per a separate 2010 agreement, became the exclusive distributor for Westeel in the U.S.
Representatives for AGI and Buhler weren’t immediately available for comment Wednesday.
AGI’s move comes as it posts record sales so far in fiscal 2014 in both its Canadian and U.S. markets, due to record-level harvests in both countries in 2013, an expected record crop in the U.S. this year and farmers opting to store grain as prices drop and grain transportation woes continue.
AGI on Tuesday booked profit of $23.5 million on $312 million in sales for the nine months ending Sept. 30, up from $22.1 million on $269.3 million in the year-earlier period. Sales in Canada and the U.S. were up 40 and 23 per cent respectively from the same nine months in 2013. — AGCanada.com Network
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