Maple Leaf Foods to unlock value as purpose-driven consumer packaged goods business, spinning off its world-leading pork business
TSX: MFI
www.mapleleaffoods.com
Creating two independent public companies each with a sharper focus to execute its own growth strategy and pursue its uncompromising commitment to best-in-class sustainability practices
"This transaction is the start of a new era to unlock the full potential of two outstanding businesses, each with a distinct value proposition and growth opportunities," said
The plan to proceed with the separation, which is expected to be completed in 2025, has been approved by the Board of Directors of
"This is the right transaction at the right time as we move forward with our sustainability vision, seeking to create value for all stakeholders," said
"I am passionate about both of these businesses and have absolute confidence in the powerful potential of this transaction," continued
The separation will create value by building on the momentum in the businesses to deliver:
- Two clear and compelling investment opportunities, each with a distinct value proposition and growth strategy.
- Sharpened execution focus from dedicated management teams.
- Continuing best-in-class sustainability practices at both companies and enduring commitments to continue to lead in sustainability.
Maple Leaf Foods– An iconic Canadian company with an inspiring vision and leading brands
Following the completion of the transaction,
"Today's announcement is a pivotal next step in
The new
The new
The new
"The new
Transaction Details, Timing and Future Updates
Detailed information regarding the transaction and the new
Management has made preliminary estimates of selected financial information regarding the new
- Pro Forma Adjusted EBITDA (as defined below) for the new
Pork Company for this period would have been approximately$70 million , or approximately$180 million when adjusted for normal market conditions (as defined below). - Pro Forma Adjusted EBITDA for
Maple Leaf Foods , excluding the pork business, for this period would have been approximately$395 million .
These are preliminary estimates only and are expected to change. See "Non-IFRS Measures and Management's Preliminary Estimates of Certain Financial Information" for further important information on these estimates and the associated calculations. Each of these figures is expected to be refined prior to the separation, with full financial details to be presented in the prospectus and management information circular to be filed in connection with the transaction.
The transaction will be subject to shareholder approval at a Special Meeting of
The transaction is expected to be structured as a return of capital spin-off. To the extent that shares of the new
The Special Committee requested from
Capital Markets Conference Call & Investor Presentation Details
A conference call will be held at 8:00 a.m. ET on
A webcast of the announcement will also be available at
An investor presentation related to the announcement will be made available here under Presentations and Webcasts on the
Non-IFRS Financial Measures and Management's Preliminary Estimates of Certain Financial Information
The following table presents management's preliminary estimates of certain financial information regarding the new
Management believes that these preliminary estimates are useful in providing an indication of the relative size of the businesses upon separation. Each of these figures is expected to be refined prior to the separation, with full financial details to be presented in the prospectus and management information circular to be filed in connection with the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
Last twelve months ended |
|
||||||
(in millions of Canadian dollars) |
|
New Pork |
|
|
|
Eliminations |
|
Consolidated |
|
Sales |
|
$ 1,652 2 |
|
$ 3,553 3 |
|
$ (355) 4 |
|
$ 4,850 5 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ 72 6 |
|
$ 397 7 |
|
$ - |
|
$ 469 5,8 |
|
Adjusted EBITDA Margin 9 |
|
4.4 % |
|
11.2 % |
|
|
|
9.7 % |
|
Estimate of potential impact of separation 10 |
|
|
|
~ |
|
|
|
|
|
Pro Forma Adjusted EBITDA 11 |
|
~$70 |
|
~$395 |
|
|
|
|
|
Pro Forma Adjusted EBITDA margin 12 |
|
~4% |
|
~11% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimate of potential market normalization impact13 |
|
~$110 - |
|
|
|
|
|
|
|
Pro Forma normalized Adjusted EBITDA 14 |
|
~$180 |
|
|
|
|
|
|
|
Proforma normalized Adjusted EBITDA Margin 15 |
|
~10% - 11% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
(1) |
Refers to the business that will be retained after the separation by |
(2) |
Represents management's preliminary estimate of sales (both to |
(3) |
Represents management's preliminary estimate of sales attributable to the business that will be retained by |
(4) |
Primarily represents management's preliminary estimate of sales from the new |
(5) |
Calculated by adding the previously reported results for the year ended |
(6) |
Represents management's preliminary estimate of the portion of consolidated Adjusted EBITDA attributable to the new |
(7) |
Represents management's preliminary estimate of the portion of consolidated Adjusted EBITDA attributable to |
(8) |
For a definition of Adjusted EBITDA (consolidated), and a reconciliation of Adjusted EBITDA (consolidated) for the periods described in note (4) above to consolidated net income for such periods, see the Company's MD&A filed on SEDAR and SEDAR+ for the year ended |
(9) |
Defined as Adjusted EBITDA divided by Sales. This metric is subject to change and is expected to be refined prior to the separation in the same manner as the metrics from which this metric is derived, as noted above. |
(10) |
Represents management's preliminary estimate of the potential impact on Adjusted EBITDA of the new |
(11) |
Defined as Adjusted EBITDA plus management's preliminary estimate of the potential impact of the separation described in, and subject to the qualifications described in, note (10) above. |
(12) |
Defined as Pro Forma Adjusted EBITDA, as described in note (11) above divided by Sales. This metric is subject to change and is expected to be refined prior the separation in the same manner as the metrics from which this metric is derived, as noted above. |
(13) |
Presented for illustrative purposes only, based on management estimates and assumptions, to indicate what the potential impact on Pro Forma Adjusted EBITDA may have been if market conditions during the period presented had reflected normal market conditions, defined as the 5-year pre-pandemic (2015 – 2019) average ("Normal Market Conditions"). Actual market conditions during the period presented were materially different from Normal Market Conditions, and there can be no assurance that actual Pro Forma Adjusted EBITDA would have been impacted in the manner shown if Normal Market Conditions had existed during the period presented, or that actual future market conditions will reflect Normal Market Conditions. This metric is not intended to be indicative of potential financial results for any future period. |
(14) |
Defined as Pro Forma Adjusted EBITDA, as described in note (11) above, plus management's preliminary estimate of the potential impact if market conditions during the period presented had reflected Normal Market Conditions, subject to the qualifications described in note (13) above. This metric is presented for illustrative purposes only and is not intended to be indicative of potential financial results for any future period. |
(15) |
Defined as Pro Forma normalized Adjusted EBITA, as described in note (14) above, divided by Sales. This metric is presented for illustrative purposes only and is based on management estimates and assumptions. This metric is subject to change and is expected to be refined prior to the separation in the same manner as the metrics from which this metric is derived, as noted above. Actual market conditions during the period presented were materially different from Normal Market Conditions, and there can be no assurance that actual Pro Forma Adjusted EBITDA Margin would have been impacted in the manner shown if Normal Market Conditions had existed during the period presented, or that actual future market conditions will reflect Normal Market Conditions. This metric is not intended to be indicative of potential financial results for any future period. |
Adjusted EBITDA, Pro Forma Adjusted EBITDA, and Pro Forma normalized Adjusted EBITDA, and related margins, as presented in the table above, are non-IFRS metrics and do not have a standardized meaning prescribed by IFRS. Consequently, they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.
Forward-Looking Statements
This document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, projections, beliefs, judgements and assumptions based on information available at the time the applicable forward-looking statement was made and in light of the Company's experience combined with its perception of historical trends. Such statements include, but are not limited to, statements with respect to objectives and goals, in addition to statements with respect to beliefs, plans, targets, goals, objectives, expectations, anticipations, estimates, and intentions. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "could", "would", "believe", "plan", "intend", "design", "target", "undertake", "view", "indicate", "maintain", "explore", "entail", "schedule", "objective", "strategy", "likely", "potential", "outlook", "aim", "propose", "goal", and similar expressions suggesting future events or future performance. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict.
By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Specific forward-looking information in this document may include, but is not limited to, statements with respect to:
- the anticipated benefits of
Maple Leaf Foods separating into two independent public companies, including each company's growth potential, business model, value proposition and ability to be a leader in its field; - the structure of the separation as a return of capital spinoff and the anticipated tax consequences;
- the expected timing of the completion of the separation;
- the timing and receipt of shareholder approval in respect of the transaction and receipt of other customary approvals, including third-party consents;
- the post-separation business structure of
Maple Leaf Foods and the newPork Company , including the 19.9% ownership of the newPork Company byMaple Leaf Foods and the entry into and benefits of the evergreen pork supply agreement between the two companies; - the competitive conditions and the ability of
Maple Leaf Foods and the newPork Company to position themselves competitively in the markets in which they operate; - the execution of the business strategy of
Maple Leaf Foods following the spinoff, including the development and expected timing of business initiatives, brand expansion and repositioning, plant protein category investment and performance, and investment in potential growth opportunities and the expected returns associated therewith; - the execution of the business strategy of the new
Pork Company following the spinoff, including increasing volumes, optimizing operational and processing efficiencies, and building on industry-leading sales mix and margins; - the composition of the management teams of each company and their ability to execute on each company's business strategy, value proposition and prospects for growth;
- the ability of
Maple Leaf Foods and the newPork Company to achieve their respective sustainability objectives; - changes in customer and consumer expectations related to sustainability matters; and
- future performance, including with respect to financial objectives, goals and targets and global pork market dynamics.
The forward-looking statements are based on certain key expectations and assumptions made in respect of
- expectations and assumptions concerning the timing and completion of the separation of
Maple Leaf Foods into two independent public companies and the success of such separation; - expectations regarding the adaptations in operations, supply chain, customer and consumer behaviour, economic patterns (including but not limited to global pork markets), foreign exchange rates, international trade dynamics and access to capital, including possible presence or absence of structural changes associated with economic recovery since the pandemic;
- the competitive environment, associated market conditions and market share metrics, category growth or contraction, the expected behaviour of competitors and customers and trends in consumer preferences;
- the success of the business strategy of
Maple Leaf Foods and the newPork Company and the relationship between pricing, inflation, volume and sales of each company's products; - prevailing commodity prices (especially in pork and feed markets), interest rates, tax rates and exchange rates;
- the economic condition of and the sociopolitical dynamics between
Canada , theU.S. ,Japan andChina , and the ability ofMaple Leaf Foods and the newPork Company to access markets and source ingredients and other inputs in light of global sociopolitical disruption, and the ongoing impact of global conflicts on inflation, trade and markets; - the spread of foreign animal disease (including ASF and Avian Influenza), preparedness strategies to manage such spread, and implications for all protein markets;
- the availability of and access to capital to fund future capital requirements and ongoing operations;
- the availability of insurance coverage to manage certain liability exposures;
- prevailing regulatory, tax and environmental laws; and
- future operating costs and performance, including the ability of
Maple Leaf Foods and the newPork Company to achieve operating efficiencies and maintain sales volumes, turnover of inventories and turnover of accounts receivable.
Readers are cautioned that these assumptions may prove to be incorrect in whole or in part and actual results may differ materially from those anticipated in any forward-looking statements.
Factors that could cause actual results or outcomes to differ materially from the results expressed, implied, or projected in the forward-looking statements contained in this document include, among other things, risks associated with the following:
- the separation of
Maple Leaf Foods into two independent public companies not proceeding as expected, including as a result of the conditions of the transaction not being satisfied; - the possibility that the separation will not be completed within the anticipated time period or at all;
- the ability of the separated companies to each succeed as a standalone publicly traded company,
- the possibility that the separation will not achieve its intended benefits;
- unanticipated effects of the announcement or pendency of the separation on the market price of the Company's securities and/or on the financial performance of the Company;
- macro economic trends, including inflation, consumer behaviour, recessionary indicators, labour availability and labour market dynamics and international trade trends (including global pork markets);
- the results of each of Maple Leaf Food's and the new
Pork Company's execution of its business plans, the degree to which benefits are realized or not, and the timing associated realizing those benefits, including the implications on cash flow; - competition, market conditions, and the activities of competitors and customers, including the expansion or contraction of key categories, inflationary pressures, pork market dynamics and
Japan export margins; - the health status of livestock, including the impact of potential pandemics;
- international trade and access to markets and supplies, as well as social, political and economic dynamics, including global conflicts;
- operating performance, including manufacturing operating levels, fill rates and penalties;
- availability of and access to capital, and compliance with credit facility covenants;
- the execution of capital projects and investment maintenance capital;
- food safety, consumer liability and product recalls;
- climate change, climate regulation and each company's sustainability performance;
- strategic risk management;
- acquisitions and divestitures;
- fluctuations in the debt and equity markets;
- fluctuations in interest rates and currency exchange rates;
- pension assets and liabilities;
- cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally;
- the effectiveness of commodity and interest rate hedging strategies;
- impact of changes in the market value of the biological assets and hedging instruments;
- the supply management system for poultry in
Canada ; - availability of plant protein ingredients;
- intellectual property, including product innovation, product development, brand strategy and trademark protection;
- consolidation of operations and focus on protein;
- the use of contract manufacturers;
- reputation;
- weather;
- compliance with government regulation and adapting to changes in laws;
- actual and threatened legal claims;
- consumer trends and changes in consumer tastes and buying patterns;
- environmental regulation and potential environmental liabilities;
- consolidation in the retail environment;
- employment matters, including complying with employment laws across multiple jurisdictions, the potential for work stoppages due to non-renewal of collective agreements, recruiting and retaining qualified personnel, reliance on key personnel and succession planning;
- pricing of products;
- managing each company's supply chain; and
- other factors as set out under the heading "Risk Factors" in the Company's Management Discussion and Analysis for the year ended
December 31, 2023 .
The Company cautions readers that the foregoing list of factors is not exhaustive.
More information about risk factors can be found under the heading "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended
All forward-looking statements included herein speak only as of the date hereof. Unless required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are expressly qualified by this cautionary statement.
About
About
View original content to download multimedia:https://www.prnewswire.com/news-releases/maple-leaf-foods-to-unlock-value-as-purpose-driven-consumer-packaged-goods-business-spinning-off-its-world-leading-pork-business-302191580.html
SOURCE