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Pork packers interested in ailing major hog producers

Maple Leaf, Olymel eye Big Sky; Puratone protection extended

Two major Canadian pork processors are among those expressing interest in Canada's second-biggest hog producer, Big Sky Farms -- which is looking for new ownership after soaring feed costs left it unable to pay its bills.

Big Sky, which produces about a million pigs per year and is based near Humboldt, Sask., entered receivership in early September. Manitoba-based hog producer Puratone Corp. is also up for sale, after entering court protection from creditors last month.

Both Maple Leaf Foods and Olymel are sizing up Big Sky, said Kevin Brennan, senior vice-president at Ernst and Young, the receiver for Big Sky. Big Sky is already a supplier to those companies' hog plants.

Some packers outside Canada are also interested, he said.

"There's a great deal of interest in terms of buying Big Sky," said Brennan, adding that Big Sky is for sale as a whole, not in pieces.

"They take a long-term view of the industry itself, and if there's a concentration of producers going out of business it provides opportunity for others to grow."

Dave Bauer, spokesman for Toronto-based Maple Leaf, said it's premature to comment on any specific opportunities the company may have.

"We are evaluating several options that would secure our longer term hog supply," he said.

A spokesman for Olymel, headquartered at St. Hyacinthe, Que., could not be immediately reached.

A severe drought in the United States has decimated crops this year, which has led to higher costs for grains used to feed pigs. Rising feed costs have prompted some farmers to liquidate their herds, putting short-term pressure on hog prices and making losses worse for the remaining North American hog farmers.

Ernst and Young will ask a court next week to approve a sales process for Big Sky.

Saskatchewan Agriculture Minister Lyle Stewart said Big Sky should be an attractive acquisition for "major operators" in Canada looking to expand.

"I would expect it to be sold off more or less in one piece. It's too valuable an asset" to shut down, he said.

Big Sky owes about $69 million to four secured creditors: lenders Bank of Nova Scotia ($26 million), Bank of Montreal ($16.7 million), National Bank of Canada ($16.2 million) and Farm Credit Canada ($9.8 million).

Puratone attracts interest

Despite the hog industry's problems, there are parties also interested in buying Puratone as a whole, said court-appointed monitor Brent Warga of Deloitte.

Two parties filed expressions of interest with the monitor in buying all or most of the company, and a third group has also expressed interest. All were rejected, but the parties were invited to make new offers by mid-October, with the intent of a sale by Oct. 22, according to court documents.

A Manitoba court this week extended Puratone's protection from creditors until Nov. 2.

Puratone, which sells about 500,000 hogs annually, owes a total of $86 million to three secured creditors: lenders Bank of Montreal ($40.9 million), Farm Credit Canada ($40.3 million) and Manitoba Agricultural Services Corp., the province's crop insurance and ag lending agency ($5 million).

Both Big Sky and Puratone continue to feed pigs and pay staff as usual, and have not liquidated their herds.

Canada is the world's third-largest pork exporter and the biggest live hog exporter.

-- Rod Nickel
writes for Reuters from Winnipeg.

Related stories:
Hog producer Puratone enters creditor protection,
Sept. 13, 2012
High feed costs push Big Sky into receivership,
Sept. 11, 2012



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