Shareholders in southwestern Saskatchewan’s Great Sandhills Terminal are expected to meet this summer to consider a $17.4 million offer from the grain firm formerly known as the Canadian Wheat Board.
CWB on Monday announced an all-cash $581.98 per share offer for all shares in the independent firm, which operates an high-throughput inland grain terminal on Highway 32 east of Leader, Sask., about 150 km northwest of Swift Current.
Great Sandhills’ (GST) shareholders are to expect a circular with additional details on CWB’s proposal in “upcoming weeks,” before a shareholder vote on the offer at a meeting expected to be held in August. The offer requires approval from two-thirds of voting shareholders to pass.
The deal would include GST’s 19,400-tonne capacity terminal at Leader, which combines a 13,000-tonne capacity concrete house facility and an automated steel annex with 6,400 tonnes of storage capacity.
GST also has a 59 per cent stake in Great Sandhills Railway, which operates about 190 km of former Canadian Pacific Railway (CP) track running from west of Swift Current to Burstall, Sask., plus a spur line running west from Burstall to serve energy operations in southeastern Alberta.
GST also has minority stakes in Alliance Grain Terminal at the West Coast; GNP Consulting, a transportation and logistics consulting firm; and Alliance Seed Co., which handles identity-preserved seed sales.
GST said Monday its board is unanimous that a CWB deal is in the best interests of the company and recommends shareholders vote in favour. The directors, GST noted, have already committed their own shares and “yea” votes. The board cited benefits such as CWB’s access to export markets and “significant grain marketing experience.”
“Challenges”
CWB’s offer to buy GST comes as the independent terminal firm has booked a substantial jump in sales and service revenues. GST credited its sales jump to the same deregulation in Prairie grain marketing which has led the former Wheat Board to buy and build grain-handling infrastructure since August 2012.
“The increase in sales revenues (is) directly attributable to the change to dual marketing in the grain industry,” GST said in its 2013 annual report, noting its sales “shifted to open market products throughout the year which generated the overall increase in gross sales revenues.”
GST noted it has “realized challenges with respect to adjusting its purchasing and sales practices to the open market and in generating profitable movement in its new environment.”
For its fiscal year ending July 31, GST booked a loss attributable to GST shareholders of $31,778 on sales of $51.59 million, down from a $760,056 profit on $22.45 million in sales in fiscal 2012.
GST’s “cost of sales” also rose substantially, at $46.53 million, up from $17.45 million in 2012.
If GST’s shareholders approve the deal, the terminal would become part of a briskly-expanding asset base for the CWB in Western Canada, already including Prairie West Terminal, a farmer-owned group of elevators also in western Saskatchewan. [Related story]
CWB’s handling assets also already include Winnipeg-based Mission Terminal, which came with a Thunder Bay grain terminal, a grain elevator west of Brandon, Man., and stakes in three Prairie producer-car loading facilities and five shortline rail operations.
CWB this spring also announced plans to build new high-throughput elevators at Bloom, Man., west of Portage la Prairie, and at Colonsay, Sask., about 60 km east of Saskatoon.
CWB’s arrangement with GST includes a “non-solicitation” commitment from GST, but grants CWB the right to match any “superior proposal” made for the terminal.
It also provides for CWB to pay a break fee of $800,000 if it walks away from a deal — and for GST to pay the same amount if it walks away from the deal in favour of a proposal from some other buyer, or if GST’s board pulls its recommendation. — AGCanada.com Network
