Ceres looks to Canada for footprint, product line expansion

14-Aug-2019 - Last updated on 15-Aug-2019 at 13:25 GMT

The proposed acquisition of Delmar Commodities is part of an ongoing effort to expand Ceres Global Ag Corp’s footprint and product line by adding facilities in Canada and soy crush ability, says CFO.

The Minnesota-based agricultural merchandising and supply chain company announced that it is exercising its option and starting the process to acquire the Manitoba-based Delmar Commodities, Ltd.

Ceres markets and handles feed ingredients and grain along with value-added agricultural products, industrial product, energy products and fertilizer and provides supply chain logistics services for a global customer base, according to company information. Delmar Commodities works with agricultural processing and supply chains and focuses on four business lines – soybean crush, grain merchandising, birdfeed production and distributing Legend Seed products in western Canada.

The acquisition is expected to expand Delmar’s footprint in Canada by adding a series of facilities along with assets in Manitoba, said Kyle Egbert, vice president and chief financial officer for Ceres Global Ag Corp.

“Part of our stated growth strategy has been to grow our grain origination assets as well as diversify our products,” he told FeedNavigator. “With the addition of Delmar, we make meaningful progress on both of these initiatives.”

The two companies also share similar values, he said. Adding, “We both value deep relationships with farmers and customers as one of our key missions.”

“The acquisition will account for all of the business of Delmar,” he said. “With the addition of Delmar, we grow our reach in Canada, add strategic grain origination and strengthen our capabilities with the addition of the Delmar team.”

Currently, the company is working through due diligence on the proposed acquisition, said Egbert.

Ceres previously said it was anticipating that the due diligence and completion of a definitive share purchase agreement would conclude in August.

Acquisition details and highlights

Ceres had the ability to buy all of Delmar’s issued and outstanding shares for CAD $16m (US $12.1m) in cash along with the assumption of CAD $7.6m (US $5.7m) in existing term debt, according to company information.

When complete, Delmar is set to work as a subsidiary of Ceres and company operations and employees would be adapted into Ceres’ operational structure, the company reported. Delmar has seven facilities across Manitoba including a soybean crushing plant, which uses a mechanical extraction system to generate feed ingredients.

Currently, Ceres has a grain and oilseed storage capacity of about 29.7m bushels and operates facilities in Duluth, Minneapolis and Shakopee, Minnesota along with sites in Northgate, Saskatchewan and Port Colborne, Ontario, according to company information. It also has an interest in the short-line railway Stewart Southern Railway, which is based in southeast Saskatchewan.

The addition of Delmar’s facilities would provide Ceres soy crush facilities and a new business line for the company, said Egbert. It also would bring an opportunity for Ceres to expand its presence in the supply chain and help diversify “product mix.”

“The addition of Delmar to the Ceres team will be beneficial to both businesses and their customers and employees as the combined operations will create the opportunity for strategic growth through shared market knowledge, capabilities and established relationships,” he added.

Earlier expansion efforts

The potential acquisition of Delmar is not the first step Ceres has taken to expand its footprint. The company purchased Nature’s Organic Grist, LLC through a subsidiary company in 2018.

The move added to Ceres’ ability to work with organic grains and feed ingredients along with ancient grains, the company reported at the time. It also added institutional knowledge regarding how to work with organic products.