One of the joint-venture owners of Winnipeg pea and canola protein processor Merit Functional Foods says it’s in talks to buy full control of the cash-strapped company.
Two days after Merit entered a court-ordered receivership, Vancouver-based Burcon NutraScience announced Friday it “intends to submit a formal proposal to acquire the business.”
Burcon said Merit’s receivership “was an anticipated step in the process of addressing Merit’s financial situation” and “does not alter” Burcon’s plan to buy the business.
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Burcon, whose current ownership stake in Merit is about 31.6 per cent, said Friday it “remains actively engaged in discussions” with PricewaterhouseCoopers (PwC), Merit’s court-appointed receiver.
The receivership was requested in a Feb. 24 filing by federal lending agencies Export Development Canada (EDC) and Farm Credit Canada (FCC), who in 2020 provided debt financing toward Merit’s construction and start-up. In their filing, they put the principal and interest owed to them at about $58.5 million and $36.5 million respectively.
Burcon, whose ownership group also includes U.S. agrifood giant Bunge and former executives of Hemp Oil Canada, said it “believes that it is in a unique position to bring Merit’s business to profitability.”
“Merit’s facility was designed and built to produce protein ingredients using Burcon’s technologies,” Burcon CEO Kip Underwood said in the company’s release Friday. “Merit’s business is a strong strategic fit for Burcon by providing additional revenue sources, better connection to customers and markets, and direct influence over the manufacture of Burcon’s protein ingredients.”
Burcon said it has the “process engineering expertise to improve bottom line performance through production efficiency gains” and can leverage its “innovation portfolio” to launch “new plant proteins beyond pea and canola.”
Merit’s co-CEO Ryan Bracken had said in a LinkedIn post on Wednesday that “while our proteins have been formulated into countless products globally, we couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough.”
EDC and FCC had said Feb. 24 they expected Merit to run out of operating cash by around March 3 or 4 and would then “no longer be able (to) operate its business as a going concern.”
The construction of the Merit plant in Winnipeg’s CentrePort industrial park came during the rise of the COVID-19 pandemic in North America, which Bracken said meant that “we started up prior to understanding the full impact of what COVID could do to our business plan.”
The pandemic and other factors ultimately led to a “doubling” of input costs, border closures, customers shuttering their own research and development facilities, interest rates “rising exponentially” and lenders and investors becoming more risk-averse, he said.
In all, he said Wednesday, the company’s move into receivership spells “the end to Merit as it stands today.” — Glacier FarmMedia Network
