Westeel deal augurs well

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This article was published 13/11/2014 (4146 days ago), so information in it may no longer be current.

Consolidation in the manufacturing of grain-handling equipment in Winnipeg has created what one analyst called a “big North American storage and grain-handling juggernaut.”

Ag Growth International (AGI) has purchased Winnipeg grain-bin manufacturer Westeel for $221 million.

Westeel is the dominant grain-bin manufacturer in Western Canada — controlling as much as 50 per cent of the market.

AGI controls about 50 per cent of the grain-auger market in the U.S. corn belt through a number of different branded manufacturers throughout Western Canada and the U.S. Midwest.

“What goes hand-in-hand with grain augers? — storage bins,” said the Bay Street equity analyst who spoke on condition his name was not used. “Ag Growth has just gone from 10 per cent share to a 60 per cent share in the storage-bin market (in Western Canada). This is just a wonderful deal for Ag Growth. There is a lot they can do with this deal.”

In a prepared statement, Gary Anderson, president and chief executive officer of AGI, said, “AGI’s vision is to become the global market leader in grain handling, storage and conditioning solutions. (This) acquisition will add an iconic Canadian brand of grain storage to AGI’s already impressive stable of leading manufacturers of grain-handling and conditioning equipment.”

AGI’s brands include Westfield, Hi Roller, Tramco and Batco.

Westeel had been owned by Toronto-based Vicwest Inc. and was one of two operating divisions. Vicwest has been acquired by the Kingspan Group out of Ireland, which will retain the other division, Vicwest Building Products.

André Granger, Westeel’s president, said his company is excited about the potential to go forward as one of the AGI group of companies.

“We have the largest market share by far in the storage-bin business and AGI is the clear leader in grain augers. This is an opportunity for us to work together and develop that market in a combined offering,” Granger said. “The other obvious synergy is that we both sell internationally. By combining the two businesses, we will have the opportunity to compete more strongly with the large competitors out of the U.S.”

Westeel has about 260 employees in Winnipeg and about 600 in total, including at three plants in Saskatchewan and Alberta and a small one in Italy.

Granger said it was too early to tell exactly how the integration will play out, but he said: “For the most part, my expectation is that this will be a great opportunity for our employees to continue to be part of a very focused ag company and continue to grow.”

The Vicwest sale requires shareholder and regulatory approval and is expected to close in the first quarter of 2015.

AGI will finance the acquisition partially with a bought-deal share and debt offering worth about $90 million.

The remainder of the purchase price of the transaction will be funded by AGI through expanded credit facilities.

The deal was announced earlier this week just prior to the release of AGI’s third-quarter results, which was the fifth consecutive record quarter for AGI in terms of both trade sales and EBITDA (earnings before interest, taxes, depreciation and amortization).

Sales were $119 million for the quarter and were up 17.4 per cent for the first nine months of the year. Net profit was down significantly for the quarter, however, to $8.6 million, but that was due almost entirely to a $5-million loss on foreign exchange.

With the addition of Westeel’s $180 million in annual revenue, it will add about 44 per cent to the $400 million of annual revenue AGI generated in the past 12 months.

It will also significantly add to AGI’s bottom line. Last year, Westeel produced about $20 million in EBITDA. In the first nine months of this year, AGI produced $65.2 million in EBITDA.

martin.cash@freepress.mb.ca