WINNIPEG, Manitoba — Ag Growth International Inc. (TSX: AFN) ("AGI" or the “Company”) announced that AGI, Vicwest Inc. (TSX: VIC) ("Vicwest") and Kingspan Group plc ("Kingspan") have entered into an arrangement agreement (the "Arrangement Agreement") pursuant to which, in accordance with a court approved plan of arrangement (the "Arrangement"), Kingspan (through an acquisition company) will acquire all of the issued and outstanding shares of Vicwest and AGI (through an acquisition company) will acquire substantially all of the assets of Vicwest's Westeel Division ("Westeel") (AGI's acquisition of the Westeel assets, the "Transaction").
Headquartered in Winnipeg, Manitoba, Westeel is a leading provider of grain storage solutions in Western Canada offering a wide range of on-farm and commercial products for the agricultural industry. Westeel also has a growing international platform focused on complementary geographies and offering highly engineered crop storage and handling solutions. For the year ending Dec. 31, 2014, Westeel is expected to generate Adjusted EBITDA of approximately $20 million. The estimated Adjusted EBITDA reflects earnings of the Westeel business (before any costs associated with Vicwest's corporate support functions that will not be transferred to AGI as part of the Transaction) less incremental corporate support costs AGI estimates will be required post-closing.
The aggregate purchase price for the Transaction is $221.5 million in cash, which reflects an enterprise value for Westeel of approximately $210 million and $11.5 million attributed to certain assets that will be acquired by AGI at closing, including net cash and working capital adjustments and the facility in Regina, Saskatchewan that is currently for sale.
"AGI's vision is to become the global market leader in grain handling, storage and conditioning solutions. Today's 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, including Westfield, Hi Roller, Tramco and Batco," said Gary Anderson, president and chief executive officer of AGI. "Westeel provides a complementary product offering to expand our growth platform within North America and around the world. Combined we create a Canadian-based agricultural champion, providing an expanded North American platform to leverage globally while in turn reducing our overall risk profile to emerging market development," he added.
Management believes the Transaction enhances AGI's competitive position as a manufacturer of portable and stationary grain handling, storage and conditioning equipment and provides the following benefits to AGI:
· A strategic acquisition of Canada's leading brand in grain storage will complement AGI's position as a leader in North American grain handling and storage solutions
· The combination of AGI and Westeel provides the scale to compete against large, global peers
- Pro forma annual revenue increase of approximately 44% to $580 million for the 12-month period ended Sept. 30, 2014
- The combined company's product catalogue, depth of management expertise and geographic footprint materially enhances AGI's ability to serve a broad customer base and provide complete solutions across North American and international markets
- Westeel's global focus on Europe, Middle East/North Africa and India complements AGI's focus on Eastern Europe, Latin America and Southeast Asia/Australia
· Westeel is highly complementary to AGI's existing product catalogue
- Westeel offers products that are not currently part of AGI's catalogue, including smoothwall bins, hopper cones and commercial hopper-bottom bins, which expand AGI's seed and fertilizer catalogue
- The combination of AGI's grain handling products and Westeel's grain storage solutions creates a comprehensive product catalogue capable of delivering complete solutions to the agriculture industry
· Diversification of customers, products and geography
- Westeel's Canadian presence balances AGI's strength in the U.S. and other international markets
- Pro forma the Transaction 38% of 2013 revenue was generated in Canada as compared to 21% for AGI standalone and 40% was generated in the U.S. as compared to 53% for AGI standalone. Additionally, pro forma the Transaction, 22% of 2013 revenue was generated outside of North America.
· Significant SG&A, sales and manufacturing synergies
- Estimated near-term synergies of $5 million per annum
· Transaction generates significant and immediate accretion on the basis of funds from operations per common share and earnings per common share for AGI shareholders, before synergies
- Westeel's cashflow generation lowers AGI's payout ratio and provides additional support to AGI's dividend