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.
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.
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.
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.
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)
For further information: Investor Relations, Steve Sommerfeld, 204-489-1855, [email protected]