Possible options including a sale, merger or moving into the cannabis business are now on the table for “commodity streaming” canola firm Input Capital Corp.
Regina-based Input, which trades publicly on the TSX Venture Exchange, announced Wednesday its board has launched a “comprehensive review of strategic alternatives to enhance shareholder value.”
The review, which will include GMP Securities and Cormark Securities as advisors, is expected to look at “the full range” of potential alternatives for the business including, among others:
- a potential sale of the company,
- business combinations or joint ventures,
- acquisitions of other companies,
- moving into “emerging” crops such as cannabis and/or hemp,
- scalable mortgage debt financing, or
- a “go-private” transaction.
Wednesday’s announcement follows the company’s decision in December to renew its share repurchase plan, aimed at buying back up to 10 per cent of its public float.
Input on Dec. 14 said its management believes the company’s shares have been trading in a range that “does not adequately reflect their value” and buying and cancelling shares under a normal course issuer bid “will enhance shareholder value in general.”
The company in December said its previous such plan, launched a year earlier, resulted in the repurchase of about 1.65 million Input shares at an average price of $1.23 each by the end of fiscal 2018. Input shares (TSXV: INP) traded early Wednesday afternoon at 96 cents each.
Input emphasized Wednesday there “can be no assurances” that this review will result in any transaction.
Input, in business since 2012, bills itself as a “non-operating farming company” which currently deals in canola, obtained from Prairie farmers by way of “multi-year streaming contracts,” including capital streams, marketing streams and, more recently, “mortgage streams.”
The company’s canola purchases, from growers in all three Prairie provinces, generally involve up-front payments in return for agreed-upon tonnage over a specified number of years.
“To canola buyers, Input is like a large virtual farm which produces and sells canola over a large geographically diverse footprint, but does not own the land, or equipment or operate the farm,” the company says on its website.
At the end of fiscal 2018, Input reported 388 streaming contracts in its portfolio, up from 301 at its previous year-end.
Its mortgage streaming option, soft-launched in January last year, yielded 42 mortgage stream contracts by year-end, the company said.
Input last May was the plaintiff in a high-profile court case against a Saskatchewan farmer, alleging breach of contract over unmet canola delivery obligations against several upfront payments by the company.
A Queen’s Bench judge in May ruled the farmer was “unjustly enriched” by the upfront payments and must repay that money. However, the judge also ruled the farmer’s various agreements with Input “must be set aside as unconscionable” and described the contractual relationship as “substantially unfair.”
Input said in May it would appeal parts of the Queen’s Bench decision “with respect to the interpretation of the streaming contracts and security.” — Glacier FarmMedia NetworkTagged acquisitions, alternatives, cannabis, Canola, debt financing, Input Capital, joint ventures, sale, share repurchase, shareholder value, streaming, TSX Venture Exchange