Maple Leaf Foods is examining its options after competitor Olymel placed a “stalking horse” bid on Big Sky Farms of Saskatchewan.
Big Sky is a supplier for Maple Leaf’s Brandon facility, but went into receivership earlier this fall.
“We don’t expect any short-term impact on our hog supply and we have several contingency plans in place that would expand or add to our existing hog sources,” said Maple Leaf spokesman Dave Bauer.
The company will continue to monitor the situation at Big Sky Farms as it develops, he said, but didn’t indicate if Maple Leaf planned to make its own offer to purchase.
Just over two weeks ago, the Quebec-based Olymel made a bid for the Saskatchewan operation, which already supplies its plant in Red Deer, Alberta with hogs.
“This is a strategic potential acquisition, and that’s why we have put $65 million on the table,” said Olymel spokesman Richard Vigneault.
A “stalking horse” bid is an offer made in a bankruptcy proceeding that allows the receiver to seek other bidders before making a decision.
Currently, Big Sky Farms’ Humboldt-based operations produce roughly one million hogs each year, making it Canada’s second-largest hog producer.
But debts totalling nearly $70 million, coupled with a spike in feed costs, left the company in a position from which it could not recover.
If Olymel’s purchase bid is successful, this will be the company’s first foray into hog production.
Maintaining a secure supply of hogs is important, said Vigneault.
“We know it is a tough time in the pork industry in the West as well as the rest of the country,” he added.
As one of the country’s largest pork and poultry processors, Olymel has operations in Alberta, Ontario, Quebec and New Brunswick employing a total of 10,000 people.
In 2011, it was responsible for $2.3 billion in exports to more than 60 countries. Canada as a whole exports $3.6 billion in pork and live hogs worldwide.
When asked if Big Sky would continue to supply Maple Leaf with hogs, should Olymel’s bid be successful, Vigneault said he couldn’t comment.
“We are entering a process with the receiver… and we will see how it unfolds,” he said.
Interested companies have until November 9 to make bids on Big Sky via its court-appointed receiver, Ernst & Young Inc. Currently, only one bid has been received, but other bids are possible.
Ernst & Young Inc., tout Big Sky as a “vertically integrated infrastructure encompassing genetics, feed milling, transportation and production,” on its website.
If additional offers are received, a deal would be approved by the receiver in early 2013.