WINNIPEG, March 28, 2019 /CNW/ - Ag Growth
International Inc. (TSX: AFN) ("AGI" or the "Company") is pleased
to announce that the previously disclosed transaction to acquire
100% of the shares outstanding of Milltec Machinery Limited
("Milltec") was completed today. The purchase price1 for
Milltec was $109.5 million, plus the
potential for up to an additional $38.4
million based on the achievement of EBITDA1
targets. The transaction was 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.
____________________________
|
1 See
"Reader Advisories – Currency Conversions" and "Reader Advisories -
Non-IFRS Measures" below.
|
Milltec is headquartered in Bangalore,
India, and is a market leading manufacturer of rice milling
and processing equipment in India.
"The acquisition of Milltec marks an important step for AGI
as we expand into rice equipment and enter the large, and rapidly
growing, markets in India.
Milltec now forms the foundation of our platform in
India as we build a footprint to
deliver our complete 5-6-7 strategy. India is one of the world's largest producers
and consumers of all agriculture products and will invest heavily
in the infrastructure required to facilitate the daily lives of
over a billion people. Milltec joins AGI at an
inflection point in its journey from a small regional company to a
Pan-India business. We will invest and collaborate to accelerate
this journey. The founders of Milltec, and a very talented
team, are joining AGI in the pursuit of our goal to supply the
world's food infrastructure," said Tim
Close, President and CEO of AGI.
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.
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.
READER ADVISORIES
Currency Conversions
All currency conversions in this press release are based on the
Indian Rupee to Canadian dollar exchange rate of 0.0192 on
March 11, 2019, the date AGI entered
into the agreements to acquire Milltec.
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 our expectations and beliefs with respect to the
benefits of the Milltec acquisition including anticipated
cross-selling, consolidation, synergy and growth opportunities, the
expected continuing involvement of Milltec's founders and
management, 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, anticipated agricultural production
in our market areas including India, growth in the size of the
rice processing equipment market in 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 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 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)