Ag Growth International Inc. today announced the acquisition of substantially all of the operating assets of Airlanco, a manufacturer of aeration products and filtration systems that are sold primarily into the commercial grain handling and processing sectors. The purchase price of USD $11.0 million plus closing costs and a working capital adjustment will be financed from Ag Growth's acquisition line of credit and represents a valuation of approximately five times Airlanco’s normalized fiscal 2010 EBITDA.
Airlanco is located in Falls City, Nebraska and has traditionally served customers headquartered or located in North America. The Company had sales of approximately $11 million in 2010, operating out of an 80,000 square foot facility with 65 employees.
"We are very excited to add a respected company like Airlanco to our family," said Gary Anderson, Chief Executive Officer, "Airlanco is a key player in the aeration fan market in the United States and is recognized as a reputable solution provider for the high capacity fan market. In addition, Airlanco provides dust collection and filtration systems across a broad range of customers, with a strong focus in commercial grain handling and several processing sectors. The Airlanco brand is known for its premium quality and commitment to customer satisfaction. Airlanco will add key product categories to the AGI catalog, strengthening our 'one-stop shop' concept and in turn allowing us to better serve new and existing customers in the global marketplace."
Market Update and Third Quarter Preliminary Sales Estimate
Western Canada – hot and dry weather throughout most of the summer resulted in an early and efficient harvest. Based on government statistics, the harvest in Saskatchewan was 91% complete as at September 26, 2011, compared to 29% at the same time in 2010. Harvest in other areas of western Canada is also substantially complete. Weather conditions during harvest were for the most part excellent and accordingly the harvest was clean and efficient and the crop was generally taken off at optimal moisture levels. Consistent with the Company's previous experiences, a fast, dry and efficient harvest has resulted in a significant reduction in demand for portable grain handling and aeration equipment.
United States – a severe heat wave enveloped the corn-belt and Great Plains region for most of the summer resulting in an acceleration of crop maturity after a late spring planting. The heat stress of the summer coupled with varied weather conditions in recent weeks has resulted in lower yield expectations and reduced crop production estimates which have been reflected in a number of crop updates provided by the United States Department of Agriculture. Although harvest is progressing at roughly the same pace as 2010, we believe farmer uncertainty with respect to yield and visible crop damage in certain areas has resulted in a significant reduction in demand for portable grain handling and temporary storage equipment.
As a result of these North American crop and harvest dynamics, together with the less than optimal conditions in Mepu's regional market and start-up issues at the Company’s green-field storage bin facility, management currently estimates third quarter trade sales for Ag Growth will approximate $81 million, compared to $86 million in the second quarter of 2011. Reduced in-season sales of portable grain handling equipment are expected to also have a negative impact on trade sales in the fourth quarter of 2011. The Company’s outlook for commercial grain handling and international sales remains positive.
"This year has continued to present challenges," said Gary Anderson, Chief Executive Officer of Ag Growth. "First delayed planting, then a hot dry summer and now highly variable weather conditions as we enter harvest has resulted in lower than anticipated yields and reduced crop production forecasts. These factors in combination appear to have created a wait and see attitude in many farmers' purchasing behavior with a consequent reduction in purchases of portable grain handling and temporary storage equipment in the third quarter. Despite the softness of this quarter, our outlook towards the agricultural sector remains positive and by continuing to lever our brand strength and product offering we believe we are poised for growth in 2012 and beyond."
Ag Growth will hold a conference call on Wednesday, October 5, 2011, at 11:00 A.M. EST. To participate in the conference call, please dial 1-866-226-1798 or for local access dial 416-340-2218. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-800-408-3053 or for local access dial 905-694-9451. Please quote confirmation code 1845180.
About Ag Growth
Ag Growth is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, chain conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. Ag Growth has ten manufacturing facilities in Canada, the U.S. and Finland and its sales, marketing, and distribution system distributes product in 48 states, nine provinces, and internationally.