Revised, March 11 — Canada’s second-largest grain handler has signed a $25 million deal to buy one of Saskatchewan’s independent high-throughput terminals — itself partly-owned by the No. 3 handler.
Winnipeg’s Richardson International plans to buy North East Terminal’s elevator at Wadena, Sask., about 100 km east of Humboldt, as well as NET’s four crop input dealerships in the region, at Wadena, Kelvington, Ponass Lake and Foam Lake.
The deal goes to NET’s shareholders for approval at a meeting April 6 and, if approved, is expected to close on April 13, Richardson said in a release Thursday.
NET general manager Garnet Ferguson confirmed Friday the sale price for the facilities will be $25 million.
When or if the deal is approved, Richardson said it plans to put up another $3 million to “upgrade and enhance” NET’s grain handling and crop input facilities, “with an aim to improving safety, increasing efficiencies and better serv(ing) customers.”
Among NET’s equity holders, mostly farmers in the region, is the Canadian wing of agrifood giant Cargill, currently Canada’s third-biggest grain industry player.
Winnipeg-based Cargill owns 5,900 Class D shares in NET and has a 25-year grain handling agreement with the Wadena company. The handling agreement runs until late November 2017.
But NET and Cargill have now reached a settlement agreement, in which Cargill would vote its shares in line with the wishes of NET’s voting Class A, B and C shareholders, Ferguson said Friday.
If the NET sale to Richardson wins shareholder approval, Cargill would then end its handling agreement and other business arrangements with NET, he said. Financial terms of the settlement agreement were not disclosed.
During NET’s 2010 fiscal year, Cargill bought $8.27 million in grain from NET, while NET bought $8.01 million in ag inputs from Cargill.
Curt Vossen, president of privately-held Richardson, on Thursday described NET as a “great fit with our existing business” and said the company is “extremely pleased with this opportunity and the fact that North East Terminal chose Richardson to complete this transaction.”
According to Ferguson, NET opted to reach an agreement with Richardson after an unnamed third party made moves toward an unsolicited takeover bid for NET.
Buying NET, Vossen said Thursday, “will allow us to provide greater service to our customers in northeastern Saskatchewan. It will also support our export sales program and our new canola processing plant in Yorkton.”
Current NET staff will be offered the opportunity to join Richardson, “allowing customers to continue to deal with the same people at the facility,” the company said.
NET was formed in 1989 to build the Wadena terminal, which opened in late 1992. The terminal includes a 13,700-tonne capacity workhouse, 11,600 tonnes of grain condo storage space, a 13,000-tonne capacity bulk grain bin, exterior storage, drying and cleaning facilities and a 59-car rail siding with access to both CN and CP rail lines.
In its fiscal year ending July 31, 2010, NET booked $994,094 in profit on $35.33 million in sales and other revenue, up from $268,025 on $44.27 million in the year-earlier period.
While its fiscal 2010 profit rose from 2009 levels, gross sales were far lower thanks mainly to unseeded acres in the region due to wet weather.
The drop in acres led to an $8.7 million drop in crop input sales, offset partly by added sales from the former Tri-Way Fertilizer store at Foam Lake, which NET bought in late 2009.
“We are confident that Richardson will ensure continued success for North East Terminal and our producers,” Ferguson said in Richardson’s release.