Premium Brands income trust to incorporate

Vancouver food manufacturing firm Premium Brands has announced plans for its conversion from an income trust to a corporation.

Premium Brands, which owns specialty food businesses in all four western provinces and Washington state including the Grimm’s, Harvest, McSweeney’s, Bread Garden, Hygaard and Hempler’s brands as well as Centennial Foodservice and B+C Foods, said Wednesday it has inked a deal with biotech firm Thallion Pharmaceuticals for the conversion.

Under the deal, Premium Brands’ income trust unitholders will get one common share of Thallion in exchange for every trust unit of Premium Brands held on the effective date of the conversion, and Thallion will change its name to Premium Brands Holdings Corp., or “New Premium Brands.”

Once the conversion is complete, “New Premium Brands” will own and operate the existing businesses of Premium Brands and its subsidiaries, and the trustees and management of Premium Brands would become the board and management of “New Premium Brands.”

“New Premium Brands” wouldn’t keep any of the businesses carried on by Montreal-based Thallion, which currently involve development of anti-cancer therapies and an antibody product to treat serious E. coli bacterial infections.

The deal with Premium Brands calls for Thallion to transfer substantially all of its assets and all its liabilities to a new subsidiary of its parent corporation (“New Thallion”) and to get consideration of $8.85 million for its trouble.

Premium Brands has been assessing “a variety of options to address the impact of the trust taxation rules legislated by the federal government in June 2007,” Will Kalutycz, Premium Brands’ chief financial officer, said in the company’s release Wednesday.

“We believe that the transaction we are announcing is the most efficient method of effecting our conversion and are pleased that we will be positioned to maintain our current cash distribution rate.”

Premium Brands, which was previously publicly traded under the name Fletcher’s Fine Foods, converted itself to an income trust in 2005.

Since then, “we have grown our annual revenues from approximately $200 million to $450 million, our (earnings before interest, taxes, depreciation and amortization) from $19.4 million to $40.6 million and our distributable cash per unit from $1.176 to $1.692,” Premium CEO George Paleologou said.

“Looking forward, we are very pleased to be addressing any uncertainties associated with our current ownership structure and its potential negative impact on our ability to continue to execute our unique specialty food and differentiated distribution based growth strategies.”

Winnipeg grain handling equipment maker Ag Growth in April announced a similar strategy to convert from an income trust to a corporation, making a deal to assume the tax losses of a mining company.

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