WINNIPEG, March 11, 2019 /CNW/ - Ag Growth International
Inc. (TSX: AFN) ("AGI" or the "Company") is pleased to announce
that it has entered into binding purchase agreements to acquire
100% of the outstanding shares of Milltec Machinery Limited
("Milltec") for $109.5 million, plus
the potential for up to an additional $38.4
million based on the achievement of EBITDA1
targets. The transaction will be funded by AGI's
revolving credit facility. For the twelve months ended
January 31, 2019, Milltec's
sales1 and EBITDA1 were $56.2 million and $10.1
million, respectively.
Headquartered in Bangalore,
India, Milltec is a market leading manufacturer of rice
milling and processing equipment in India. The company has 400 full-time
employees and operates four production facilities in India, three of them in Bangalore, and one in Chennai.
Ravindranath Ramaiah and Rajendran
Joghee founded the company in 1998 and each have over 25 years of
experience in the rice milling equipment industry. They will
continue to provide leadership and vision to Milltec going forward
in their roles as Managing Directors of the company. Over the
past few years Milltec has also bolstered its management team with
the addition of two very experienced individuals, Rajan Aggarwal, Chief Executive Officer, and
Ganapathy Subramaniam, Chief
Financial Officer.
Completion of the transaction is subject to customary conditions
precedent and is expected to close prior to March 31, 2019.
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1
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See "Non-IFRS
Measures" below.
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The acquisition of Milltec is the next step in AGI's 5-6-7
strategy:
- Geographic diversification: The acquisition of Milltec moves
AGI into the rice processing systems space with a complete product
line and establishes AGI's platform in India. AGI gains seasonal and cyclical
diversification through this acquisition.
- Complementary product offering and customer base: Milltec adds
a complete rice processing product line to AGI's product
catalogue.
- Strategic Platform for further consolidation: Milltec provides
a platform for further consolidation in India, which is very fragmented across the
seed, fertilizer, grain, feed and food industries. The acquisition
also provides AGI with greater access to the broader Asian
markets.
- Sales, manufacturing and supply chain synergies: AGI has
identified several opportunities for sales, operational and supply
chain synergies, including the sale, service and support of AGI's
current product lines through Milltec's pan-India distribution platform, the sale of
Milltec's products across AGI's established global distribution
network, and significant advantages in engineering support.
- Growth drivers identified, including: (i) As incomes rise in
India consumers are choosing to
purchase higher quality, and branded, rice products which is
rapidly increasing the size of the rice processing equipment
market; (ii) Milltec has recently expanded into pulses and seed
equipment adding another lever for growth in the region; and (iii)
The additional access to capital that AGI provides will support
both domestic and export growth.
"We are continuing to execute on our 5-6-7 strategy with the
acquisition of Milltec, a leading manufacturer of rice processing
systems in India. This marks the
beginning of a new chapter for AGI as we establish our platform in
a large and rapidly growing market and region. Milltec is a
launching pad for AGI in India and
the broader Asian region with a complete product line for rice as
well as providing the manufacturing, design, engineering, service
and installation capabilities that AGI will leverage across our
current product lines. This comprehensive platform brings a
talented management group, excellent manufacturing facilities,
pan-India distribution and service
teams, as well as turn-key systems capabilities. A perfect fit with
our 5-6-7 strategy. Ravindranath and Rajendran have built a great
business based on quality products, efficient operations and a
dynamic culture that continuously strives to develop new products
and provide the highest level of service to their
customers," said Tim Close,
President and Chief Executive Officer of AGI. "We are
proud to welcome Ravindranath, Rajendran, Rajan, Ganapathy and the
entire Milltec team to the AGI family."
OVERVIEW OF MILLTEC'S PRODUCT OFFERING
Milltec manufactures a full line of rice milling equipment
including the following:
Front-end equipment: Milltec offers a full
complement of pre-cleaners, boilers, par-boilers and dryers.
This equipment allows for the removal of foreign particles, boiling
or par-boiling and drying of the paddy using steam to prepare the
grain ahead of processing.
Milling equipment: Included in this category are
classifiers, gravity separators, de-stoners, pneumatic shellers,
thickness graders, whiteners, silky polishers, rotary sifters and
length graders.
End-of-line equipment: Milltec's colour sorters use
optical technology to remove impure grains on the basis of their
colour. As well, Milltec sells packaging equipment with a
bagging capacity range of 10 to 75 kilograms and features including
weighing bins, discharge bins and controls.
In addition to selling rice processing equipment Milltec offers
end-to-end turnkey solutions for rice processing
activities.
Milltec has also expanded its product portfolio to include
pulse, seed, maize and wheat processing equipment as well as
ancillary products including silica extraction and co-generation
plants.
COMPANY PROFILE
AGI is a leading provider of equipment solutions for agriculture
bulk commodities including seed, fertilizer, grain, feed and food
processing systems. AGI has manufacturing facilities in
Canada, the United States, the United Kingdom, Brazil, France and Italy, and distributes its product
globally.
Further information can be found in the disclosure documents
filed by AGI with the securities regulatory authorities, available
at www.sedar.com and on AGI's website www.aggrowth.com.
NON-IFRS MEASURES
References to "EBITDA" are to the unaudited earnings of Milltec
before income taxes, finance costs, depreciation and amortization.
EBITDA is a non-standardized financial measure that is not
calculated or presented in accordance with International Financial
Reporting Standards ("IFRS"). Accordingly, it may not be possible
to compare Milltec's EBITDA with EBITDA or other financial measures
of other companies having the same or similar businesses. We use
these non-IFRS financial measures such as EBITDA in addition to,
and in conjunction with, results presented in accordance with IFRS
(or the accounting principles used to prepare Milltec's financial
statements) as we believe they reflect an additional way of viewing
aspects of a company's operations that may provide a more complete
understanding of factors and trends affecting the company's
business. Investors are cautioned that EBITDA should not replace
profit or loss as indicators of Milltec's performance, or cash
flows from operating, investing, and financing activities as a
measure of Milltec's liquidity and cash flows. AGI's method
of calculating Milltec's EBITDA may differ from the methods used by
other issuers.
In addition, the financial information in this news release
relating to Milltec's sales and EBITDA is derived from Milltec's
financial statements, which are prepared in accordance with
generally accepted accounting principles in India, which differ in some material respects
from IFRS, and accordingly may not be comparable to the financial
statements of AGI or other Canadian public companies.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that
reflect our expectations regarding the future growth, results of
operations, performance, business prospects, and opportunities of
the Company and Milltec. Forward-looking statements may contain
such words as "anticipate", "believe", "continue", "could",
"expect", "intend", "plan", "will" or similar expressions
suggesting future conditions or events. In particular, the
forward-looking statements in this press release include statements
relating to the closing and the anticipated closing date of the
Milltec acquisition, the anticipated source of financing for the
acquisition, the expected continuing involvement of Milltec's
founders and management, our expectations and beliefs with respect
to the benefits of the Milltec acquisition including anticipated
consolidation, synergies and growth opportunities, and our business
plans and strategy following completion of the acquisition. Such
forward-looking statements reflect our current beliefs and are
based on information currently available to us, including certain
key expectations and assumptions concerning, among other things,
the timely satisfaction of the conditions to completion of the
acquisition, anticipated agricultural production in our market
areas including India, financial
performance, business prospects, strategies, product pricing,
regulatory developments, tax laws, the sufficiency of budgeted
capital expenditures in carrying out planned activities, currency
exchange rates and the cost of materials, labour, services, AGI's
ability to achieve the expected benefits of the acquisition of
Milltec, and the anticipated impact of the acquisition of Milltec
on AGI's business. Forward-looking statements involve significant
risks and uncertainties. A number of factors could cause actual
results to differ materially from results discussed in the
forward-looking statements, including changes in international,
national and local business conditions, weather patterns, crop
planting, crop yields, crop conditions, the timing of harvest and
conditions during harvest, seasonality, industry cyclicality,
volatility of production costs, agricultural commodity prices, the
cost and availability of capital, currency exchange rates,
competition, the failure to complete the Milltec acquisition on the
terms or on the timing announced or at all and the failure to
realize some or all of the anticipated benefits of the acquisition
of Milltec. Many of these risks and uncertainties are described
under "Risks and Uncertainties" in our most recently filed MD&A
and Annual Information Form. These factors should be considered
carefully, and readers should not place undue reliance on the
Company's forward-looking statements. There can be no assurance
that the Company will be able to complete the Milltec acquisition
on the terms or on the timing announced or at all or that any of
the anticipated benefits of the Milltec acquisition will be
realized. We cannot assure readers that actual results will be
consistent with these forward-looking statements and we undertake
no obligation to update such statements except as expressly
required by law.
SOURCE Ag Growth International Inc. (AGI)