Ag Growth earns name

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This article was published 01/05/2010 (5653 days ago), so information in it may no longer be current.

Ag Growth International Inc. has taken a bold step in advancing its desire to expand sales into Eastern Europe by acquiring an equipment manufacturer in Finland.

And it likely will not be the last as the company is ramping up its mergers and acquisition activity.

"We have a few things on the radar," Ag Growth CEO Rob Stenson said Friday. "We’ll probably be looking at South America and other areas as well."

The growing Winnipeg-based manufacturer, which produces an array of portable and stationary grain-handling equipment, paid $11.7 million for 100 per cent of Mepu Oy, a manufacturer of grain-drying systems based in Ylane, Finland, about 200 kilometres northwest of Helsinki.

The deal has already closed.

Sales of Mepu’s farm-level and commercial grain drying systems are concentrated in Finland (where about 70 per cent of its sales are generated) and Eastern Europe, primarily in the Baltic region, and Belarus. Over the last three years it has averaged annual sales of about $19 million. It has about 80 employees.

Stenson said it may be a small acquisition, but it has exciting prospects.

"This is our first acquisition off North American soil," he said. "And it is consistent with our long-term strategy to build our catalogue and take it to new geographies."

The addition of a line of grain-drying equipment will fill a hole Ag Growth has had in its portfolio that includes portable and stationary grain-handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain-handling accessories and grain aeration equipment.

Ag Growth has targeted the Eastern European grain belt of Russia, Ukraine and Kazakhstan as a growth area as that region starts to beef up its relatively undeveloped grain-handling infrastructure.

The collapse of the international credit markets two years ago has had a significant impact on the pace of development in that market, but those issues are dissipating and opportunities are opening up.

Stenson said it is still too early to tell just what role the Finnish company will play in Ag Growth’s European market thrust, but he said there was general agreement from Mepu Oy’s management Ag Growth was the best fit for them.

"Ag Growth’s offer circumvented an auction because they saw this as the right fit to take their company to the next level," Stenson said.

Mepu Oy has just one product line grain-drying equipment. Ag Growth will now be able to add its grain bins, augers, belt conveyors and aeration equipment into their European dealer network.

Ag Growth was able to make the purchase using cash on hand made available partly from a $100-million convertible debenture offering that closed last fall.

The deal is particularly strategic for Ag Growth in that it gives the company a sales force on the ground with cultural familiarity in the markets where there is growth potential for Ag Growth’s North American-built products.

It also allows the company to establish a European manufacturing presence without having to expose itself to political risks that may exist in some of the former Soviet republics.