The below news release was issued this afternoon by a new Scoular business partner, Legumex Walker Inc. (LWI), and its subsidiary, Pacific Coast Canola (PCC). Scoular Senior Vice President Todd McQueen and Director Kevin Thompson are quoted in the release.
Agreement positions Pacific Coast Canola for growth; Scoular to invest in Legumex Walker
WINNIPEG, MB – (October 27, 2014) – Legumex Walker Inc. (TSX: LWP) (“the Company”) announced today that it has entered into a long-term strategic alliance with The Scoular Company (“Scoular”), a century-old agricultural marketing company with operations across North America and global trading partners. The alliance comprises two key elements.
First, the Company’s Pacific Coast Canola subsidiary (“PCC”) and Scoular have agreed to enter into a long-term arrangement in which Scoular will procure all canola seed for processing at the PCC plant and will market all of the canola meal and canola oil produced by PCC. Key terms of the arrangement include:
Second, Scoular will invest in a CAD$16.5 million Legumex Walker Inc. convertible debenture that is expected to help link Scoular’s marketing and transportation networks to Legumex Walker’s specialty crops business. The debenture will have an interest rate of 7.75% and will be convertible at Scoular’s option into Legumex Walker common shares at CAD$6.75 per share.
“Our alliance with Scoular is the product of extensive discussions in which we have found numerous synergies with our specialty crops business in the U.S. and Canada, as well as the PCC relationship,” said Joel Horn, President and Chief Executive Officer of Legumex Walker Inc. “We have been pleased to discover a shared commitment to customers in the healthy, specialty food ingredient market. There is growing demand for these high-value specialty products and we’re excited to partner with Scoular as we pursue both short- and long-term opportunities in this area.”
“Scoular is very pleased to be working with Legumex Walker. We admire its innovative approach in working with specialty crop producers on both sides of the border and believe our proprietary origination and extensive logistics network will bring immediate value to these efforts,” said Todd McQueen, Senior Vice President of The Scoular Company. “Our investment in Legumex Walker gives us a platform from which we also expect to jointly discover new opportunities that bring value back to key production areas by offering end users a full spectrum of grains, pulses and specialty crops for feed and food.”
“We achieved our highest production levels to date at PCC in the third quarter, operating at 78 percent capacity utilization despite continued feedstock constraints and a temporary over supply of meal that negatively impacted volumes and margins,” said Matt Upmeyer, Chief Operating Officer for Pacific Coast Canola. “Our alliance with Scoular should support even higher crush rates going forward as they help drive the production and availability of locally grown seed, which has the potential to grow significantly. Scoular has already expanded seed origination to eastern and southern Idaho and will be reaching even farther into key growing regions. In addition, our alliance should help support our canola product margins by expanding meal and oil sales into new markets, including overseas markets where higher prices are often attainable. This will provide flexibility in the future to adjust to market dynamics.”
Both companies place significant importance on increasing local and regional production of canola seed, of both commodity and specialty varieties. It is expected that production contracts will increase with the goal of optimizing the volume and product mix coming out of the PCC plant in Warden, Washington.
“The alliance with Pacific Coast Canola is a natural extension of Scoular’s growth in the Intermountain and Pacific Northwest growing regions,” said Kevin Thompson, Director of Intermountain and PNW markets segments for The Scoular Company. “In particular, we will have the ability to create substantial freight advantages for movements in and out of PCC’s plant, leveraging the Scoular facilities that surround the Idaho dairy shed. Many customers will find that Scoular can be the solution to most all of their market needs as we begin to operate at PCC in conjunction with our other businesses.”
Although the agreements are subject to customary closing conditions, Legumex Walker and Scoular expect the transactions to be finalized within the next week.
AltaCorp Capital Inc. acted as exclusive financial advisor to Legumex Walker in connection with the strategic alliance and debenture financing.
About Legumex Walker Inc.
Legumex Walker is a growth-oriented processor and merchandiser of special crops (sunflower seeds, flax and canary seed), pulses (lentils, peas, beans and chickpeas) and canola products. The Company is one of the largest processors of special crops and pulses in Canada. Legumex Walker has 15 processing facilities strategically located in key growing regions in the Canadian Prairie Provinces, the American Midwest and China; a global sales, logistics and distribution platform; and access to multimodal transportation capabilities. In addition, the Company has an 84 percent interest in Pacific Coast Canola, LLC, which operates the largest commercial-scale canola oilseed processing facility west of the Rocky Mountains.