Legumex to sell processing plants, wind down company

Winnipeg | Reuters –– Prairie special crops firm Legumex Walker said Monday it has agreed to sell its pulse and special crop processing plants and expects to sell its U.S. canola-crushing facility, allowing it to wind down the company.

Winnipeg-based Legumex plans to sell its special crops division, which includes 14 plants in Canada, the U.S. and China, to private U.S. grain-marketing company Scoular for $94 million. Including Legumex’s working capital, the deal is valued at $174.6 million.

Legumex also said it is negotiating the sale of its 84 per cent interest in Pacific Coast Canola (PCC), a crushing plant in Washington state. Glencore PLC owns the rest.

Legumex shares (TSX:LWP) rose 140 per cent to $2.16 on Monday in Toronto.

In July, Legumex said PCC had defaulted on a $54.6 million loan. The company was hampered in 2014 by railway congestion limiting delivery of canola seed, and more recently weak industry margins and plunging crude and soyoil prices.

“It’s really been difficult and that’s why all the independent canola crushers have sold,” Legumex CEO Joel Horn said in an interview. “None of the independents were able to survive pretty amazing macroeconomic events.”

Two other canola crushing plants, Felda’s TRT-ETGO facility in Quebec and Pico Holdings’ Northstar plant in Minnesota, were sold this year to Glencore’s agriculture segment Viterra and to CHS Inc. respectively.

Potential buyers for Legumex’s canola plant are Glencore and U.S.-based oilseeds crusher Archer Daniels Midland, Cormark analyst Marc Robinson said in a note.

Those are “two good guesses,” Horn said, but declined to identify the company Legumex is talking with.

Once the processing plants are sold, Legumex will wind down operations and expects to pay its investors $2.50-$2.75 per share. It will then cease trading on the TSX.

Scoular chief operating officer Bob Ludington said in a statement that the acquisitions will expand its U.S.-based grain-handling network, allowing it to sell to more crop buyers globally.

“We expect to operate Scoular Special Crops much like (Legumex) operates the business today, but with the financial capacity to expand operations, product lines, and distribution channels.”

Legumex Walker formed in 2011 as a merger of two family-owned Prairie companies, Tisdale, Sask.-based Walker Seeds and Roy Legumex of St. Jean Baptiste, Man. Both brought their special crop processing assets and the plan for the PCC plant into the publicly traded firm.

Legumex in 2012 bought Canada’s biggest sunflower processor, Keystone Grain of Winkler, Man., and bought stakes in the U.S. dry bean and sunflower seed markets with deals for St. Hilaire Seed Co. and the sunflower processing assets of Anderson Seed Co.

Legumex said in March it would review its “strategic and financial alternatives” for “maximizing shareholder value” — an announcement to which Legumex shares responded at the time by jumping above $3.

The deal with Scoular — which last year signed a separate deal with Legumex to source canola for the PCC plant and market its oil and meal output — still needs approval from Legumex’s shareholders at a special meeting on Nov. 9.

Legumex’s senior officers and directors and members of Roy Legumex’s founding Sabourin family, who together hold about 15.5 per cent of Legumex Walker, have all committed their stakes to the deal.

The deal, Legumex said Monday, will also be subject to federal approval under the Competition Act and provincial approvals as per Manitoba’s Farm Lands Ownership Act and Saskatchewan’s Farm Security Act.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg. Includes files from AGCanada.com Network staff.