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Winnipeg, Manitoba
July 30, 2001
Agricore and
UGG announced today that their
boards of directors have unanimously agreed to a merger plan to
create Agricore United, western Canada's leading agri-business.
Combining the companies will generate significant benefits for
farmer members and shareholders of both Agricore and UGG. By
uniting, UGG and Agricore will be able to substantially reduce
administrative and operating costs, build on each company's
strengths and maintain a strong presence in the face of
increasing competition in the western Canadian agricultural
industry.
"To continue to serve the needs of our members, Agricore
recognized a need to partner with a company that has good
end-use connections and the capacity to access additional
capital," says Neil Silver, President of Agricore. "We
considered many options, however it soon became clear that our
strategic goals would best be met by uniting with UGG."
"This makes excellent business sense," says Ted Allen, President
and Chairman of UGG. "Each company brings a number of
complementary strengths to the table. A combined company will be
able to leverage those strengths to bring greater value to
farmers and shareholders."
For example, under the combined company, current farm customers
of Agricore will be gaining access to UGG's proven strengths in
seed, livestock and linkages to end-use markets. Current
customers of UGG will be able to draw on Agricore's acknowledged
strengths in special crops, farm inputs and west coast
throughput capacity.
"In recent years, the entry of new players and the expansion of
others has created a highly competitive environment," says
Silver. "This friendly merger will allow Agricore and UGG to
take full advantage of our recent investments and remain a
strong competitive force."
"By teaming up, the new company will be able to use its combined
asset base and human resources to best advantage," says Allen.
"This will lead to greater operational performance for the
benefit of both farmers and shareholders."
Agricore and UGG estimate that cost savings under the combined
company will be in excess of $50 million annually.
Based on each company's projected fiscal results for the year
ending July 31, 2001, the two companies, if combined, would have
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) of $145 million and cash flow (from continuing
operations) of $90 million - driven from grain handling volumes
of 12.5 million tonnes and farm supply sales of $775 million.
After evaluating several options, Agricore and UGG have agreed
that the merger would be best structured using UGG's existing
shareholder structure. Under terms of the merger agreement,
Agricore shareholders and members will have their equity in
Agricore converted into shares of the merged company.
Structuring the business combination in this way will provide
Agricore members with immediate access to their equity if they
so choose. The shares they receive in exchange for their equity
in Agricore will be publicly traded.
Under terms of the merger agreement, members and shareholders of
Agricore will be converting their equity into approximately 20.5
million shares in UGG. The total number of shares outstanding
will rise to approximately 37.3 million shares. Based on UGG's
share price at the close on Friday, July 27, 2001, the market
capitalization of the combined company would be about $450
million, making Agricore United a candidate for inclusion in the
TSE 300 market index.
Archer Daniels Midland (ADM), which is currently a significant
shareholder of UGG will see its ownership interest reduced to
approximately 19% on the date of the share conversion. ADM will
be able to exercise a pre-emptive right to acquire, within 20
business days of the effective date of the merger, additional
shares up to a maximum of a 25% interest in the merged company.
ADM has agreed to support the proposed merger.
Farmer-elected directors will maintain a strong presence on the
board of directors of the new company. Twelve of the fifteen
directors will be elected by farmer members, as is now the case
under UGG's system of governance. The remaining three non-member
directors will be elected by shareholders. The initial board of
directors will consist of six directors from Agricore, six
directors from UGG and the three non-member directors now
holding office with UGG. Two of the three non-member directors
will continue to be nominated by ADM.
The boards of directors of both Agricore and UGG have agreed
that in its grain operations, the combined company will carry on
business under the name of Agricore United. In other areas,
brand names that have the strongest recognition will be
maintained.
The boards of Agricore and UGG have also agreed that, if the
merger proceeds, Brian Hayward, CEO of UGG will be named CEO of
the combined company. Gord Cummings, CEO of Agricore indicates
he fully supports this merger and will be available to support
Mr.Hayward on a requested basis to ensure the transition is
smooth and the synergies are captured.
In addition to a review by the federal Competition Bureau and
other regulatory approvals, the merger plan is subject to the
approval of at least two-thirds of the votes cast by Agricore
delegates and at least two-thirds of the votes cast by Class B
and Class C shareholders of Agricore. Redemption of the Class A
shares was approved by the Agricore board of directors on July
27. Agricore will be holding a special meeting of shareholders
and delegates in Calgary on August 30, 2001 to consider the
merger plan.
Agricore shareholders and members with equity in their accounts
will be mailed their new share certificates approximately two
weeks following the effective date of the merger. If all
approvals are obtained, the merger transaction is expected to
become effective on or about November 1, 2001. Details of the
share conversion and merger transaction will be contained in an
information circular to be mailed to Agricore members and
shareholders on or about August 8th.
Agricore will be providing further details on the proposed
business combination at delegate meetings to be held on July 31
in Brandon and Edmonton. The two companies will also be holding
a series of joint country meetings starting August 7, to further
discuss the proposal with farmer members and shareholders.
"The cost reductions we anticipate under the new company will
improve our ability to compete more aggressively for farmers'
grain and crop input needs," says Agricore President Neil
Silver. "By uniting with UGG, we are determined to remain their
agri-business of choice."
"The companies share a rich prairie heritage that will be
preserved under the new company," says UGG President Ted Allen.
"Together, we look forward to continuing our tradition of
meeting farmers' business needs."
Agricore is a Canadian, farmer-owned agri-business that provides
fully integrated grain marketing and handling services through
its prairie-wide network of elevators and a full range of
agronomic inputs, supplies and services through retail outlets
across western Canada.
UGG is one of western Canada's largest agribusiness firms.
Founded in 1906, the Winnipeg-based company is diversified into
grain merchandising, crop input sales and distribution,
livestock production services, and farm business communications.
UGG is publicly traded on the Toronto Stock Exchange under the
symbol "UGG".
Agricore Cooperative Ltd.
* Agricore was formed in 1998 by the merger of Alberta Wheat
Pool and Manitoba Pool Elevators. AWP and MPE were farmer-owned
co-operatives, originally founded in the 1920's.
* Agricore is owned by approximately 84,000 members. As at July
31, 2000, share capital held by Class A, B and C preferred
shareholders amounted to $52.0 million. A further $184.9 million
in members' equity (i.e. patronage dividends) was held by
members in revolving and long-term equity accounts.
* Agricore provides fully integrated grain, oilseed and special
crops marketing and handling services through a network of:
- 97 primary elevators throughout western Canada including 54 in
Alberta, 2 in British Columbia, 2 (plus 4 joint ventures) in
Saskatchewan, and 39 in Manitoba (plus 1 joint venture).
- bean processing plants in Carman, Manitoba; Ray, North Dakota;
Taber, Alberta; Bow Island, Alberta; and a PeaCan processing
plant in Camrose, Alberta.
- port terminal facilities at Thunder Bay (wholly-owned),
Vancouver (including a half interest in Cascadia and a 70%
interest in Pacific Elevators Limited) and a 30.1% interest in
the Prince Rupert Grain terminal at Prince Rupert, B.C.
* Agricore retails a full range of agronomic inputs, supplies,
and related services through 116 agro centres located across
western Canada.
* Fully owned subsidiaries include XCAN Grain Pool Ltd., a
Winnipeg-based exporter of canola, wheat, feed grain and special
crops; and Demeter (1993) Inc., a Warner, Alberta-based
exporter/processor of mustard seed.
* Other joint ventures or significant business relationships
include Western Cooperative Fertilizers Ltd (66 2/3%), CanAmera
Foods (16.6%), and Heartland Livestock Services (10.2%).
* Agricore has approximately 1800 full-time employees and 650
seasonal/casual employees.
* Agricore net earnings for the year ending July 31, 2000 were
$1.3 million.
United Grain Growers Ltd.
* United Grain Growers (UGG) was founded in western Canada in
1906 as a farmer-owned co-operative.
* In 1992, UGG farmer members voted 95.3% in favour of
transforming the company from a co-operative to a publicly
traded company. UGG shares began trading publicly in July 1993.
Shares are listed on the Toronto Stock Exchange and trade under
the symbol "UGG". As at June 30, 2001, the company had 16.8
million issued and outstanding common shares.
* UGG is diversified into four related business divisions:
Grain Handling and Merchandising - operates approximately 75
grain elevators throughout western Canada, including 18 high
throughput facilities. The company also has 47 farm service
centres and six special crop facilities. UGG also owns and
operates two grain terminals at Thunder Bay, one in Vancouver
and has a 14.8% interest in Prince Rupert Grain Ltd.
Crop Production Services - develops and markets grain and forage
seed through Proven(R) Seed and provides seed, fertilizer and
crop protection products throughout the company's network of
elevator facilities and farm service centres.
Livestock Services - formulates, manufactures and markets feed
products throughout Western Canada through seven Unifeed
outlets, Hart Feeds at Ste. Anne, Manitoba, and the former Pro
Form Feeds in Chilliwack, B.C. Also markets advanced swine
genetics through Unipork Genetics(TM) and has a 32% investment
in The Puratone Corporation, a hog production company.
Farm Business Communications - publishes Grainews, Country
Guide, Cattlemen, Canola Guide and other farm-oriented
publications.
* UGG has entered into strategic business alliances or
partnerships with Archer Daniels Midland (ADM), Marubeni
Corporation, Swiss Re, Hewlett-Packard, BroadVision Inc.,
Pioneer Hi-Bred(TM), DeKalb Genetics and Australia's
Commonwealth Scientific and Industrial Research Organization
(CSIRO).
* Earlier this year, the Company formed UGG Financial, a
strategic initiative with Scotiabank, to offer expanded
financial services to western Canadian farmers.
* UGG has approximately 1500 full-time employees and 400
seasonal/casual employees.
* UGG net earnings for the year ending July 31, 2000 were $2.2
million.
Agricore Cooperative Ltd. and United Grain Growers Limited
Statistical Information
Merger Proposal (Estimates for the year ending July 31, 2001)
Agricore United Grain Cooperative Growers Ltd. Limited Combined
Operating ($ millions): Gross Revenue $3,100 $1,800 $4,900
Earnings before interest, taxes, depreciation & amortization
(EBITDA) $89 $57 $145 Cash flow (from continuing operations) $55
$35 $90
Financial ($ millions): Working capital $60 $75 $135 Net capital
assets $525 $295 $820 Total assets $1,240 $550 $1,790
Total net debt $610 $150 $760
Total Shareholders' equity $330 $230 $560
Pro Forma Common Equity (millions): Common shares outstanding
20.5 16.8 37.3 Market value of common equity at $10 per share
$205 $168 $373
Other: Farm supply sales ($ million) $465 $310 $775 Country
shipments (thousands of tonnes) 7,500 4,900 12,400 Number of
primary elevators 97 75 172 Primary elevator storage capacity
(thousands of tonnes) 1,160 700 1,860 Terminal elevator storage
capacity (thousands of tonnes) 649 424 1,073
Toronto Stock Exchange SYMBOL: UGG
Company news release
N3689
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