Canada’s largest grain company plans to buy its way into the U.S. food business with a US$240 million cash deal for Dakota Growers Pasta Co.
“We believe that by building upon our deep knowledge of the North American durum market, we can create additional value and support the increasing demand for high quality pasta desired by today’s health-minded consumer,” Mayo Schmidt, CEO of Viterra, said in a release Wednesday.
Dakota Growers, based at Carrington, N.D., about 200 km northeast of Bismarck, operates one of North America’s largest durum mills and is the third biggest maker and marketer of dry pasta products.
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The company’s production mainly goes to ingredients for other food companies but also to the foodservice and private-label retail sectors. It makes the Dreamfields brand of low-carb pastas, among about 100 different shapes of pastas including whole grain, multigrain and “omega-3” varieties.
The company started operations at Carrington in 1993 with the backing of about 1,100 U.S. Midwest farmers, using Italian durum processing equipment, and later bought a second pasta plant in the Minneapolis area.
Dakota Growers, which has been a common-stock corporation in 2002, reported revenues of about US$275 million during the year ending Oct. 31, 2009.
Regina-based Viterra’s all-cash deal is worth US$18.28 per share of Dakota Growers’ common stock, plus US10 cents per outstanding share of the company’s series D preferred stock.
The deal, already approved by both companies’ boards of directors, already has lock-up agreements in place with Dakota Growers’ major shareholders, including MVC Capital Inc., LaBella Holdings LLC, company CEO Tim Dodd and chief financial officer Edward Irion, altogether accounting for a stake of about 29 per cent of the pasta firm.
“This is an exciting opportunity for both companies, one that I believe will secure our long-term future and allow us to expand our product and service offerings to improve the value proposition for Dakota Growers customers,” Dodd said in the companies’ release.
The deal comes as Viterra seeks to boost its investment in food processing, and makes for “an excellent opportunity to deepen our relationships with North American farmers and premier food manufacturing companies and suppliers,” Karl Gerrand, Viterra’s senior vice-president for processing, said in the release.
“The pasta segment in North America has enjoyed a strong period of growth over the past several years as consumers have returned to healthy, value-driven meal choices,” he said.
“Dakota Growers’ product strength and market presence with major branded food manufacturers, retailers and institutional customers has enabled the company to participate in the resurgence of the pasta industry.”
Apart from its current stake in Can-Oat Milling, Viterra’s interests in further food processing during its previous life as Saskatchewan Wheat Pool included stakes in CSP Foods, Robin’s Donuts and Humboldt Flour Mills.
