Maple Leaf frees capital for future food investment
by Eric Schroeder
TORONTO — In a move designed in part to free capital to invest in its packaged foods businesses, Maple Leaf Foods on Aug. 23 entered into a definitive agreement to sell Rothsay, its rendering and biodiesel business, to Darling International Inc. of Irving, Texas.
Maple Leaf said it plans to use proceeds from the C$645 million ($612 million) transaction to initially pay down debt. But following completion of its prepared meats strategy, the company said it will consider appropriate deployment of excess capital, including reinvesting in its core consumer packaged foods businesses or returning excess capital to shareholders.
“The sale of our rendering and biodiesel business supports our strategy to focus on effective capital deployment and profitable growth in the consumer packaged foods market,” said Michael McCain, president and chief executive officer of Maple Leaf. “We are delighted to have concluded almost a year-long process with an agreement with Darling, the North American leader in food waste recycling. The sale will support future investments in our consumer facing businesses and allow Darling to build on Rothsay’s strong capabilities and deep customer relationships.”
Rothsay, which had EBITDA of approximately $85 million in 2012, operates six rendering plants located in Manitoba, Ontario, Quebec and Nova Scotia and a biodiesel facility in Quebec. It employs approximately 550 people, who will transition to Darling once the transaction closes. Maple Leaf plans to enter into a long-term contract with Darling to receive byproducts recycling services at competitive market rates.
Darling International Inc. is the largest and only publicly traded provider of rendering and bakery residuals recycling solutions to the U.S. food industry. The company recycles beef, poultry and pork byproduct streams into useable ingredients such as tallow, feed-grade fats, meat and bone meal, poultry meal and hides. The company also recovers and converts used cooking oil and commercial bakery residuals into feed and fuel ingredients. The products are primarily sold to agricultural, pet food, leather, oleo-chemical and biodiesel manufacturers around the world. In addition, the company provides grease trap collection services and sells used cooking oil collection equipment to restaurants.