Toronto-based pet food maker Menu Foods is considering putting some or all of itself up for sale as the finale to its recovery. The income fund announced March 16 it’s retained BMO Capital Markets as its adviser in “evaluating alternatives to maximize unit-holder value,” which could include “a sale of all or a portion of the fund’s assets or a sale of the fund itself.”
The company noted that its board and management consider such options from time to time, but have decided to formalize and speed up the process ahead of the federal government’s plans to tax income trusts.
Companies that became income trusts before the federal government announced its plans in 2006 are not required until 2011 to pay tax on the income that they distribute to their unit-holders.
The evaluation of Menu Foods is expected to take “several months” and won’t necessarily lead to a sale or any other action, the company cautioned.
Menu’s announcement comes about a month after it reached a deal with its bankers for a new fully underwritten credit facility that it said it will use to repay all its existing debt.
The new credit facilities put Menu in an “excellent position to continue the rebuilding process which began in 2007 and to take advantage of opportunities that may present themselves in the future,” CEO Paul Henderson said at that time.
Menu, which makes private-label “wet” pet foods for U. S. and Canadian retail chains, on Feb. 17 posted 2009 year-end net income of $13.7 million on $290.6 million in sales, up from a $6.8-million net loss on $260.6 million in sales in its 2008 fiscal year.
The “rebuilding” to which Henderson referred came after a major product recall by Menu and several pet food makers starting in spring 2007, following a scandal in China over tainted wheat gluten supplied to western pet food processors.
Menu later set up a US$24-million fund to settle over 100 proposed class-action lawsuits stemming from the recall.
In Menu’s case, the recall began in March 2007, stemming from indications that some Menu-made cuts-and-gravy dog and cat foods may have affected the renal health of some animals in the U. S.
Menu said a Chinese supplier of gluten, a protein ingredient used in many pet foods, had spiked its ingredients with melamine and other compounds to “artificially inflate” protein levels.