Directors of Western Canada’s biggest fruit-based food processor are weighing a proposal from its top shareholder to take the company private.
Kelowna, B.C.-based Sun-Rype Products announced Friday it’s received a non-binding proposal from Great Pacific Industries, part of Vancouver’s Jim Pattison Group, to buy the 46 per cent of publicly-traded Sun-Rype that it doesn’t already own.
Great Pacific and its acquiring company, SRF Acquisition Inc., already own about 54 per cent (5.82 million) of Sun-Rype’s common shares.
The proposal calls for the holders of the remaining 46 per cent to sell ther shares to SRF for $7.50 each, cash, which in turn would value Great Pacific’s total proposal to those shareholders at about $37.2 million.
Great Pacific’s proposal will stil need the approval of Sun-Rype shareholders, the Supreme Court of British Columbia, the TSX and other regulators. Sun-Rype has already set up a committee of its independent board members to consider Pattison’s proposal and file a “fairness opinion.”
If accepted, a final deal would then be subject to an “independent formal valuation” of Sun-Rype, as well as approval from a “majority of the minority” of Sun-Rype shareholders.
The Pattison Group’s other holdings already make it one of the biggest grocery retail, wholesale and distribution operations in Western Canada, including the Overwaitea Food Group and Buy-Low Foods.
Its proposal to take Sun-Rype private comes as Sun-Rype’s main business — shelf-stable juices, which make up about 60 per cent of its net sales — faces a “softening” market.
“It is unclear whether these declines will continue,” the company said in its release last month posting net income of about $500,000 on sales of $36.6 million for its first quarter ending March 30, down from $1.4 million on $39 million in the year-earlier period.
“Strong competitive pressures experienced on branded products in 2012 and the current year are anticipated to continue,” Sun-Rype said last month. “The prices of certain concentrates and apples are returning to historical averages, but price volatility is anticipated moving forward.”
The company’s product lines outside the juice and beverage markets include apple sauce, fruit snacks and fruit-and-grain snack bars.
Sun-Rype warned in May that while it plans to focus on “launching innovative products and broadening geographic distribution of its products to mitigate the challenges described,” that will come with higher product development and launch costs this year.
Further, the company said, “there is no certainty that the incremental sales from these products will exceed costs.”
Sun-Rype for fiscal 2012 booked net income of $1.267 million on $152.8 million in sales, up from a $5.687 million loss on $147.53 million in sales in 2011.
The company’s presence on grocery store shelves in Western Canada dates back to 1946, when it was formed as an apple orchardists’ co-operative, B.C. Fruit Processing Ltd.
The company, which adopted Sun-Rype as its business name in 1959, moved away from the co-operative model in 1993 and launched its initial public offering (IPO) as a publicly-traded company in 1996.
Sun-Rype’s main processing plant and head office are in Kelowna, in “the heart of British Columbia’s fruit growing district” in the Okanagan Valley.
The company also operates two facilities in Washington state, in “the centre of the largest apple-growing region in the Pacific Northwest.” Sun-Rype bought the business and assets of its Washington-based co-packer, Yakama Juice, in 2010.
The company, whose Okanagan Valley operations and offices employ about 400 people in all, took its product lines into stores in central and Eastern Canada starting in about 1995 and, more recently, into the U.S. — AGCanada.com Network
Fruit juice sales seen in decline, Aug. 16, 2012