U.S. investment firm takes major stake in SunOpta

A SunOpta soy milk processing line. (SunOpta, via YouTube)

Canadian organic and non-GMO food firm SunOpta Inc. has taken on a new minority owner to help it pay down debt and boost its “flexibility.”

The Mississauga-based, publicly traded company said Friday it has picked up an $85 million investment, in the form of exchangeable preferred shares, from Los Angeles-based Oaktree Capital Management.

The investment, which comes with an option to buy further shares over the next year, translates to a partially-diluted ownership stake of about 11.7 per cent for Oaktree, SunOpta said. Proceeds from the deal have gone to reduce SunOpta’s second lien debt and “increase financial flexibility.”

The company, whose consumer beverage and snack brands include Pure Nature, Sunrich Naturals and Nature’s Finest, operates 27 processing and packaging plants worldwide, mainly in the U.S. Its other Canadian assets include an office at Summerland, B.C. and a fruit snack processing plant at St. David’s, Ont.

SunOpta also markets raw organic commodities and ingredients including sunflower seed, corn, soybeans, fruits, vegetables, cocoa and coffee, and processes organic livestock feeds and birdseed.

SunOpta in June announced it would run a “review of strategic alternatives,” in view of investor pressure from hedge funds Tourbillon Capital Partners and West Face Capital to explore sales of some or all of the company.

SunOpta chairman Alan Murray said taking on Oaktree as a partner offered the “highest risk adjusted return from the many options available and evaluated by the board.” In reaching its deal with Oaktree, SunOpta said Friday it has “concluded” its strategic review.

However, the company said it would now work with Oaktree and another major shareholder, investment firm Engaged Capital, on a “thorough review of the company’s operations, management and governance.”

SunOpta said Friday it expects to offer an update on that review when it releases its third-quarter financials, plus a new “mid-range” plan outlining “performance improvements and cost savings to be realized in 2017.”

The company’s board has also named two independent directors of Oaktree’s choosing, including Dean Hollis, the chairman of Oaktree-backed AdvancePierre Foods and a former president of ConAgra’s consumer foods division, and Al Bolles, a former ConAgra chief technology and operations officer.

Brendan Springstubb, a principal at California-based Engaged Capital, will also join the SunOpta board. Douglas Greene, founder of New Hope Natural Media and an eight-year member of SunOpta’s board, has quit effective Friday, the company added.

Oaktree managing director Matt Wilson on Friday described SunOpta as “a natural fit for Oaktree given our experience in the consumer and food industries, and we see a significant opportunity to provide strategic, operational and financial support that will accelerate the company’s value-enhancing initiatives and position it for long-term success.”

“Given Oaktree’s deep industry knowledge and operational expertise, we believe they are the ideal partner for SunOpta as we seek to strengthen the company’s operations in a way that can reduce operational volatility and realize sustainable growth and value creation,” Murray said. — AGCanada.com Network

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