Ag Growth International Inc (TSX: AFN) (AGI) has completed its acquisition of Milltec Machinery Ltd, a Bangalore, India-based maker of rice milling and processing equipment.
The purchase price was $109.5 million, with the potential for up to an additional $38.4 million based on the achievement of Ebitda targets.
AGI, a Winnipeg-based provider of equipment solutions for agriculture bulk commodities, said the deal enables its entry into the rice equipment industry and establishes its platform in India.
Indian private equity firm Multiples Alternative Asset Management acquired a minority stake in Milltec in 2014.
AGI Announces Completion of Milltec Acquisition
WINNIPEG, March 28, 2019 /CNW/ – Ag Growth International Inc. (TSX: AFN) (“AGI” or the “Company”) is pleased to announce that the previously disclosed transaction to acquire 100% of the shares outstanding of Milltec Machinery Limited (“Milltec”) was completed today. The purchase price for Milltec was $109.5 million, plus the potential for up to an additional $38.4 million based on the achievement of EBITDA targets. The transaction was funded by AGI’s revolving credit facility. For the twelve months ended January 31, 2019, Milltec’s sales1 and EBITDA1 were $56.2 million and $10.1 million, respectively.
Milltec is headquartered in Bangalore, India, and is a market leading manufacturer of rice milling and processing equipment in India.
“The acquisition of Milltec marks an important step for AGI as we expand into rice equipment and enter the large, and rapidly growing, markets in India. Milltec now forms the foundation of our platform in India as we build a footprint to deliver our complete 5-6-7 strategy. India is one of the world’s largest producers and consumers of all agriculture products and will invest heavily in the infrastructure required to facilitate the daily lives of over a billion people. Milltec joins AGI at an inflection point in its journey from a small regional company to a Pan-India business. We will invest and collaborate to accelerate this journey. The founders of Milltec, and a very talented team, are joining AGI in the pursuit of our goal to supply the world’s food infrastructure,” said Tim Close, President and CEO of AGI.
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.
AGI is a leading provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, feed and food processing systems. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, France and Italy, and distributes its product globally.
Further information can be found in the disclosure documents filed by AGI with the securities regulatory authorities, available at www.sedar.com and on AGI’s website www.aggrowth.com.
For further information: Investor Relations, Steve Sommerfeld, 204-489-1855, email@example.com