Fairfax continues along planned path to take Farmers Edge private

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This article was published 23/01/2024 (984 days ago), so information in it may no longer be current.

A subsidiary of Fairfax Financial Holdings Ltd. has entered into an agreement to pay 35 cents per share for all the shares in Farmers Edge Inc. it doesn’t currently own to take the digital agriculture company private.

Fairfax is the majority owner of Winnipeg-based Farmers Edge and has been funding losses for some time.

Last November it increased its credit facility by $6.37 million to a principal amount of $81.37. Fairfax already owns 61.4 per cent of Farmers Edge shares

Farmers Edge went public in May of 2021 at $17 per share and the company’s fortunes have declined since then.

Wade Barnes, who founded the company in 2005, resigned as CEO in May of 2022.

In its most recent financial report the company recorded losses of $17.9 million in the quarter ending Sept. 30, 2023 on revenue of $4.4 million, although the loss is less than the $21.1 million it lost in the third quarter of 2022 when revenue was $5.9 million.

When Fairfax first proposed the privatization plan to the board in November it was offering 25 cents per share.

The 35 cent share offer will be voted on by shareholders sometime in mid-March.

Fairfax’s current offer represents a 218 per cent premium over the closing price the day before its original proposal in November when the company’s shares were trading at 11 cents. The offer values the company at $14.7 million.

The shares were trading at 34.5 cents on Tuesday.

This new development comes as the company seeks to cut its 2022 operating expenses in half by the end of 2024.

Among other things it has recently exited its market presence in Ukraine, Russia and Australia but continues to develop its growing business in Brazil. In addition to closing those overseas operations, it has been cutting staff across its operations for about a year now.

New management brought in after Barnes and others departed are largely based outside Winnipeg.

New CEO Vibhore Arora, the former president of Amazon Canada Fulfillment Services, was appointed in 2022. Arora and some of his close lieutenants are based in Vancouver. According to sources, most of its IT team are now based in the U.S.

One of the competitive features of Farmers Edge was the fact that it was equipment agnostic, giving it independence from the Big Ag companies like John Deere and Bayer that have competing services in the market.

A special committee of the board gave unanimous approval for the offer and the board — with Fairfax appointees and Arora (who will be staying on) abstaining — determined such a transaction would be in the best interests of the company.

Farmers Edge was one of the first independent ag tech companies offering a wide array of precision agriculture products and services including hardware and software. Powered by a combination of field sensors, AI and data analytics along with agronomic expertise its services allow farmers to become more productive.

Part of its original strategy was to capture market share by encouraging farmers to try the service at no cost for a year and then convert as many of them — ideally 70-to-75 per cent — to paying customers.

That proved to be a more challenging proposition than was originally anticipated.

martin.cash@freepress.mb.ca