Maple Leaf Food's agreement to purchase the Niverville-based Puratone Corporation is good news for Manitoba hog producers, according to the Manitoba Pork Council.
"We're happy to see that a Canadian company has purchased Puratone," said council chairman, Karl Kynoch. "We want to see plants here that can compete with their American counterparts."
With two of the largest hog-producing companies in Western Canada struggling, industry observers were questioning whether Maple Leaf would be able to find enough pigs to supply its Brandon processing plant.
Big Sky Farms of Saskatchewan had been a Maple Leaf supplier, but went into receivership this fall. Quebec-based Olymel, a Maple Leaf competitor, has an offer in play to buy it.
"This acquisition will ensure a consistent supply of hogs to our processing facility in Brandon, which is an integral supplier to our value added prepared meats and pork business," said Michael McCain, Maple Leaf CEO, in a media release.
Puratone operates roughly 50 barns in the province, producing approximately 500,000 hogs annually.
But more than providing stable processing for producers, Kynoch said Maple Leaf's offer of $42 million will show banks and financial institutions that there is still value and promise in the hog sector.
"This sends the right message," Kynoch said, adding it will also be a relief for Puratone employees.
Puratone first filed for bankruptcy protection in September and extended its creditor protection twice before a purchase plan was announced.
Court documents show that Puratone owes nearly $100 million to a wide variety of creditors, including Farm Credit Canada and the Bank of Montreal.
A sharp increase in the price of corn this summer, coupled with falling pork prices, hit many hog-related industries hard, leaving some operations unable to recover.
"The agreement reached with Maple Leaf represents a tremendously positive outcome," said Puratone CEO, Ray Hildebrand. "We are very pleased with the stability it provides our stakeholders, particularly our employees."
Maple Leaf employees approximately 19,500 people across Canada and had sales of $4.9 billion in 2011.
It also acquires 70 per cent of its hog supply from independent producers, which Kynoch said will allay concerns regarding an increase in vertical integration.