Quebec veal processors merging

The bulk of Quebec’s veal processing capacity is forming up under one banner as Delimax-Montpak gets set to buy its rival Ecolait out of creditor protection.

Delimax-Montpak Group announced Friday it has an agreement in principle to buy St-Hyacinthe-based Ecolait for total consideration of $50 million.

Delimax-Montpak said Friday the deal “will allow the veal sector in the province, and in the rest of Canada, to remain competitive internationally.”

The deal is expected to keep Ecolait’s Quebec veal production and processing operations in business, including seven company-owned farms and a Montreal-area slaughtering and processing plant at La Plaine, employing about 200 people.

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The deal will also maintain the company’s supply agreements with almost 70 affiliated farms supplying livestock to the La Plaine plant, Delimax-Montpak said.

In business since 1979, Ecolait filed for federal creditor protection Nov. 2 in the wake of what its trustee, Richter Advisory Group, described as “significant financial difficulties” including losses last year and each year from 2008 through 2014.

The trustee cited Ecolait management as attributing those operating losses to 18 years of contraction in the veal industry and an “unsuccessful” bid to enter the pork business through a subsidiary. Delft Blue, which operated a pork processing plant at Utica, N.Y., has been liquidating its assets since July.

Ecolait’s secured creditors include National Bank, with whom the company has $20.5 million in liabilities, and Farm Credit Canada, owed $4.9 million. In all, the trustee reported $63.6 million owed to secured and unsecured creditors.

Delimax-Montpak, which first approached Ecolait about a deal in late 2016, was considered the “best party in position to make an offer,” given the size of the sale, industry regulations and a “lack of other potential interested parties,” Richter reported.

‘Weakened’

“It had become clear that major changes were needed in our industry segment,” Delimax-Montpak CEO Fabien Fontaine said in Friday’s release.

“In recent years, government cutbacks to farm credit programs, transatlantic trade deals, and the changes requested to our farming practices have severely weakened the financial capacity of Quebec’s veal production and processing companies,” he said.

Specifically, Delimax said, the province’s farm financing agency, la Financiere Agricole du Quebec (FADQ), “slashed” farm credit programs for milk-fed veal and has “severely restricted” its contributions to programs available to large companies.

Also, the company said, Canada’s free trade pact with the European Union allows EU veal producers to export products to Canada “without paying the nearly 30 per cent customs duties to which they were previously subjected.”

EU exporters, Delimax said, “are also not governed by the same rules on the use of certain products” and EU calf producers have “benefited from generous subsidies that have enabled it to enhance its farming infrastructures.”

Delimax-Montpak formed through a separate consolidation in 2015, when the Fontaine family, which owns St-Hyacinthe-based Delimax, bought out the stake of the Buksbaum family in veal processor Montpak International. The Buksbaums, who founded Montpak over 50 years ago, had set up Montpak International with the Fontaines in 1995.

A deal for Ecolait’s assets will boost Delimax-Montpak’s production and processing capacity by nearly 50 per cent, Delimax-Montpak said.

Combined with Ecolait’s operations, Delimax-Montpak said it will own 100 corporate farms, work with almost 270 other farms, operate processing plants in both Canada and the U.S., employ about 1,000 people and book combined revenues of about $425 million. — AGCanada.com Network

 

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