Winnipeg, Man. — Ag Growth International Inc. (TSX: AFN) “AGI” has announced that it has entered into binding purchase agreements to acquire 100% of the outstanding shares of Milltec Machinery Ltd. for $109.5 million, plus the potential for up to an additional $38.4 million based on the achievement of EBITDA targets. For the 12 months ended Jan. 31, 2019, Milltec’s sales1 and EBITDA were $56.2 million and $10.1 million, respectively.
Headquartered in Bangalore, India, Milltec is a manufacturer of rice milling and processing equipment in India. The company has 400 full-time employees and operates four production facilities in India, three of them in Bangalore and one in Chennai.
Completion of the transaction is subject to customary conditions precedent and is expected to close prior to March 31, 2019.
The acquisition of Milltec is the next step in AGI’s 5-6-7 strategy:
- Geographic diversification:The acquisition of Milltec moves AGI into the rice processing systems space with a complete product line and establishes AGI’s platform in India. AGI gains seasonal and cyclical diversification through this acquisition.
- Complementary product offering and customer base:Milltec adds a complete rice processing product line to AGI’s product catalogue.
- Strategic Platform for further consolidation: Milltec provides a platform for further consolidation in India, which is very fragmented across the seed, fertilizer, grain, feed and food industries.The acquisition also provides AGI with greater access to the broader Asian markets.
- Sales, manufacturing and supply chain synergies:AGI has identified several opportunities for sales, operational and supply chain synergies, including the sale, service and support of AGI’s current product lines through Milltec’s pan-India distribution platform, the sale of Milltec’s products across AGI’s established global distribution network, and significant advantages in engineering support.
- Growth drivers identified, including: (i) As incomes rise in India consumers are choosing to purchase higher quality, and branded, rice products which is rapidly increasing the size of the rice processing equipment market; (ii) Milltec has recently expanded into pulses and seed equipment adding another lever for growth in the region; and (iii) The additional access to capital that AGI provides will support both domestic and export growth.
“We are continuing to execute on our 5-6-7 strategy with the acquisition of Milltec, a leading manufacturer of rice processing systems in India. This marks the beginning of a new chapter for AGI as we establish our platform in a large and rapidly growing market and region. Milltec is a launching pad for AGI in India and the broader Asian region with a complete product line for rice as well as providing the manufacturing, design, engineering, service and installation capabilities that AGI will leverage across our current product lines.
“This comprehensive platform brings a talented management group, excellent manufacturing facilities, pan-India distribution and service teams, as well as turn-key systems capabilities. A perfect fit with our 5-6-7 strategy. Ravindranath and Rajendran have built a great business based on quality products, efficient operations and a dynamic culture that continuously strives to develop new products and provide the highest level of service to their customers,” said Tim Close, President and Chief Executive Officer of AGI. “We are proud to welcome Ravindranath, Rajendran, Rajan, Ganapathy and the entire Milltec team to the AGI family.”
AGI is a provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, feed and food processing systems. AGI has manufacturing facilities in Canada, the U.S., the United Kingdom, Brazil, France and Italy.
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