Canada's biggest grain handler is getting out of the North American livestock feed business.

Viterra on Wednesday announced it will sell all its Canadian and U.S. feed operations, including mills and other facilities in three provinces and three states, to a new partnership of the feed operations' management and Birch Hill Equity Partners, a Toronto-based investment firm.

The new partnership, dubbed Hi-Pro Feeds LP, will get six feed mills, at Ste. Anne and Carman, Man., Sherwood Park, Olds and Lethbridge, Alta., and Chilliwack, B.C., plus a premix facility at Ponoka, Alta., two mill stores at Chilliwack, and Viterra's feed products office at Okotoks, Alta.

Viterra's U.S. assets going to Hi-Pro include another six feed mills, at Dexter and Clovis, N.M., Cheynne, Okla., and Lubbock, Friona and Comanche, Tex., plus a "commodity blending" and premix site at Clovis.

A Viterra spokesperson, contacted Wednesday, said the specific financial terms of this deal won't be released, but added that "a competitive sale process was implemented and the valuation is in line with industry multiples."

In its fourth-quarter financials, released last month, Calgary-based Viterra had booked a "goodwill impairment" of $8 million on its feed operations in Western Canada, citing "continued intense competition and overcapacity in the feed market."

The company said at the time that it expected "challenges" in the feed business to continue in 2012, with overcapacity ratcheting up competition and margin pressures, but it would "take steps to mitigate the effects of these issues."

Viterra's decision to sell the feed assets "was based on a strategic review process and does not include or affect its New Zealand feed assets," the company said Wednesday.

Viterra "will continue to look for opportunities to grow its processing portfolio in industries where it can achieve scale and influence and this divestment will allow us to focus our capital on areas of greatest strategic impact," CEO Mayo Schmidt said in the release.

"We are pleased that Hi-Pro intends to maintain continuity for the staff and customers of the livestock feed business going forward," he added.

"Long-term"

Hi-Pro was previously the operating name for Viterra's U.S. feed business, which was run in tandem with the Canadian business, Unifeed, under the joint banner of Unifeed Hi-Pro.

Daren Kennett, who until now was vice-president for Viterra's feed products group at Okotoks, will be Hi-Pro's CEO.

In Viterra's release Wednesday, Kennett said he expects to continue "to provide our customers with the same high level of services and quality products through the existing team of knowledgeable staff, and I am excited about the partnership with Birch Hill."

Birch Hill, which currently has about $2 billion in capital under its management, describes itself as "Canada's mid-market leader in creating long-term value" with "a record of business building over the long haul."

The equity firm, on its website, says it has "a strong value discipline when acquiring new investments, and capitalize(s) companies conservatively to allow them to take the right risks on the path to growth."

Viterra said it expects to close this deal during its second fiscal quarter, pending the usual conditions and any regulatory approvals needed.

Related stories:

Viterra buys more U.S. feed mills, April 28, 2008

Viterra buys Alta. feed mill, April 7, 2008

Viterra buys Oklahoma feed firm, Feb. 14, 2008