Pipeline Foods buys SunOpta’s organic corn, soy business for $66.5m

The deal expands Pipeline’s network of suppliers and customers as well as its distribution network for grains and oilseeds, says chief executive Eric Jackson.

AMERRA Capital Management-backed Pipeline Foods has acquired the specialty and organic corn and soy business of SunOpta, a Canadian natural and organic foods producer, for $66.5 million.

The deal includes four processing facilities in Minnesota and one in north-east Iowa. It brings Minneapolis, Minnesota-headquartered Pipeline’s network of dedicated organic and non-GMO supply chain assets to 12 facilities: eight grain elevators; two processing facilities; one dry corn mill and a soybean crushing plant, spread across Canada, North Dakota, Iowa, Missouri and Argentina.

Not included in the sale were SunOpta’s sunflower and roasting operations or its European organic sourcing and supply platform. The two companies also concluded a multi-year agreement for Pipeline to provide SunOpta ingredients needed for production of its beverage and snack offerings.

“The only anxiety [SunOpta] had, I think, with regards to the sale was to make sure that it got into the hands of someone that they knew they could work with for an extended period of time,” Pipeline chief executive Eric Jackson told Agri Investor.

Jackson said the deal came after several years’ conversation with SunOpta executives and a Raymond James-run sale process he believes to have elicited competing bids.

Whereas the Pipeline’s previous acquisitions have been of distinct facilities suitable for use within a supply chain for organic and non-GMO grains and oilseeds, Jackson said, the SunOpta deal is the first time the company has added an entire business.

In addition to expanding its network of supply chain assets, organic and non-GMO suppliers and customers, the acquisition also brings Pipeline into the ingredients business while giving the company access to new railroad lines to facilitate sales into regions of the country that are currently difficult to reach, Jackson said.

“It was almost like a zipper in that it pulls together two sides of essentially the same business and makes it much more complete,” he added. “Strategically, this was bingo for us.”

For SunOpta, which trades on the NASDAQ exchange, the sale was presented as part of a plan to optimize the business. In late 2017, Oaktree Capital Management paid $27.8 million for 3.7 million SunOpta shares that brought its existing stake in the company to almost 20 percent.

During its earnings call on Tuesday, SunOpta vice-president and chief financial officer Robert McKeracher said sale of the five assets – which had contributed $104.4 million in external revenue and $8.3 million in gross profit in 2018 – would allow the company to rationalize $3 million in general expenses.

“This sale is consistent with this [value creation plan] strategy and allows us to focus our Global Ingredients operations on our international organic capabilities, where we believe we have built the largest organic sourcing platform in the industry and are investing in expanded capabilities and capacity with more attractive margins and consistent growth,” McKeracher said.