UFA Co-Operatives Ltd (UFA) officially acquired AgraCity Crop & Nutrition Limited (AgraCity) and its assets for $48.2 million.
President and CEO Fred Thun explained of that amount, $13 million is towards the fertilizer distribution centre in Belle Plaine, and roughly $35 million allocated to AgraCity assets, including $20 million for "make whole arrangements" for farmers who haven't received product from AgraCity.
UFA is also getting AgraCity's portfolio of generic crop protection product registrations, a packaging and labelling facility in Saskatoon, and its distribution fleet.
Thun said prior to the approval, AgraCity filed for bankruptcy, and creditor protection, in December and as part of the process, agreed to have UFA as a stalking horse bidder for the company. This meant UFA had a base bid of $20 million with a right-of-first-refusal to top any best offer by $2-million.
"Over the last three months, AgraCity has been walking through the court-approved and court-led bankruptcy process, and it's good to be at the end of it because those things take a long time." Thun said. "But you have to respect the process, and the court and the monitor demonstrated a lot of rigor and discipline in terms of how they walked AgraCity to a successful conclusion in UFA's benefit."
He said they had their eye on AgraCity for a while prior to starting the acquisition process.
"We have spent a fair amount of time looking at Agri-City and obviously going through the CCAA bankruptcy process. Things really got accelerated around the December timeframe, so over the last three months has been fairly intense there."
He noted AgraCity's vision of providing "highly effective, high-quality generic chemicals to Western Canadian farmers at reasonable prices" as part of the reason why UFA decided to make the acquisition.
"I think that's what UFA brings to this deal. We really believe in that vision," he said. "We not only believe that Western Canadian farmers should have access to quality generics at great prices, but it's also really important in my mind that the Western Canadian farmer is the ultimate owner of that product and that supply chain. So that's something that's really exciting about this when I look at it, for what can this do for the producer, for the grower, and for Western Canadian agriculture? It's really neat to be involved in this."
With the deal officially closed, Thun says next steps include re-branding and ensuring farmers are paid what they're owed.
"One of the unique things with this deal was the inclusion of make whole arrangements for farmers who have not received product in prior years from AgraCity. Obviously reconciling that and figuring out how to get farmers products that they had not received previously is an immediate priority.
"Overall, we will be rebranding, and I think farmers should be excited about where we take this. It will be a very Western Canadian look, founded on UFA's roots.
"In terms of the employee base…UFA itself does not have this product in its scope of products today. As a result…we need everybody at AgraCity to continue to grow this business and to make it even better than it already was. I'm really looking forward to meeting all the AgraCity employees and hopefully they're willing to be part of UFA's future."
Thun says the deal does not include Genesis Fertilizer, since it is a separate entity.
