Agrifoods Discussion Points and Analysis
Agrifoods Overview • Agrifoods Status • Shareholder Value • Four Logical Options • Discussion Points • Risk Management • Shared Interests and Disclosure • Special committee participation • Partnership discussions • Information request
Agrifoods Status • Started as a cooperative movement; events transpired: • Saputo take over • Agropur -Ultima law suit • Today • Active in transportation • Passive financial investor in Ultima and in Cooperators Insurance • Agrifoods today does not serve the purposes for which it was created • Majority of Agrifoods’ value is derived from businesses which it does not operate or add value to member’s products • Some members feel that the board has to consider strategic direction of Agrifoods taking into account its fiduciary duty to maximize value shareholder value
Shareholder Value • 15,000 shares • Current value: $22,500 • Based on current share exchange of $1.50/share • Book value: $37,500 • Based on financial statements at $2.50 / share • Market value: $112,500 • Based on 2007 PWC assessment at ~$7.50 / share • Unrealized value: $90,000 or 80% discount • How can the Board eliminate the discount to PWC’s valuation?
Four Logical Options • Role of the board/delegates is to examine which of the four broad strategies maximize shareholder value (need to be open-minded): • Do nothing: • distribute net income and cash balances to shareholders each year • Sell assets: • distribute proceeds to shareholders • Independent growth: • make acquisitions with cash and/or debt that are accretive to share price • Partnership-based growth: • make acquisitions with strategic partners which are accretive to share price
Risk Management • New strategy has potentially unrealistic or risky objectives ($10 to 50 million net income in 5 years) • What is Agrifoods’ competitive advantage? • Strategy and process? • Ability of the Board and management to identify and deliver on acquisitions and achieve the target rates of return? • Framework to distribute cash if no suitable investments are discovered? • What is the strategy for the board to maximize shareholder value? • Example strategies... • Share buyback • Reduce tax payables • Dividend distribution can viewed as tangible value to shareholders (increase in perceived value of shares)
Shared Interests and Disclosure Deep interest in the strategic direction of Agrifoods as a significant shareholder • Serve on special finance committee (Section 15.3 and 15.4 of Bylaws) • Consider growth opportunities and options • Ultima takeover model (example) • Discuss potential partnership opportunities • Nutriva Group (Nutritech/Nutrifoods) • Why partner with Agrifoods vs. other potential partners? • Formal request as a member • Review Ultima financials and JV related agreements including the license agreement between Yoplait and Agropur • This information is critical to me as an Agrifoods member and shareholder in determining share value
Why the Agrifoods Interest Group? • Intended to be a positive tool to increase communication and interest among members and shareholders • Advocate for members/ shareholders • Founding members are losing out- not able to extract market value and at risk of not getting dividends in the future • Not really functioning as a cooperative any more “Although originally formed as a cooperative, many feel Agrifoods has not maintained the intent of a cooperative” • Increase communication and interest- currently there is a high level of apathy among members • Shared interests • I have invested in shares along with industry friends and family • Time and money spent researching