Maple Leaf splitting into 2 companies; Brandon operation set to grow by up to 20%

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This article was published 10/07/2024 (547 days ago), so information in it may no longer be current.

Maple Leaf Foods has unveiled a plan to split into two public companies next year, with a goal of increasing production in its Brandon plant by up to 20 per cent.

The decision aims to create two independent entities — Maple Leaf Foods, which will continue to operate as a brand-led consumer packaged goods company, and a new pork company in Brandon, whose new name will be revealed in the coming months.

The Brandon-based pork company’s incoming chief executive officer, Dennis Organ, told the Sun the new entity would become a standalone company, publicly traded and set to bring significant benefits to Brandon.

“Our Brandon facility, in its current state, is capable of increasing production by 15 to 20 per cent,” Organ said in an interview on Tuesday. “We are actively working on this expansion and see numerous opportunities to enhance our capabilities further. Many processes we currently outsource could be brought in-house, allowing us to expand our operations significantly.”

He said Brandon is the focal point for the new pork company’s operations, and his team will continue to invest in this facility, making it the company’s primary asset.

The Brandon operation currently has 2,200 employees. The expansion is expected to lead to new job opportunities, offering a range of positions from entry-level to skilled roles, he said, “thereby contributing significantly to the local job market and supporting economic development in Brandon.”

The new company, Organ said, would have an evergreen pork supply agreement with Maple Leaf Foods and leverage its North American sales network through a brokerage arrangement.

Under this agreement, the new company will continue to provide Maple Leaf Foods with a secure supply of high-quality, sustainable pork at market prices to meet the needs of its prepared foods business, he said.

“If Maple Leaf doesn’t utilize our product, it’s up to us then to find a way to sell our product,” he added. “Today, roughly a third of our sales are export, a third is transferred to Maple Leaf and a third is sold domestically, to retailers mostly. But absolutely after we fill Maple Leaf’s needs, then it’s up to us to go find sales for this product.”

With the completion of the transaction expected to be completed in 2025, Organ said, potential investors could buy shares in the new company.

“The new pork company will offer investors direct access to one of the world’s foremost, premium value-added pork producers with a clear vision to produce meat the right way while delivering industry-leading financial performance,” he said. “We are already setting the standard for best practices in sustainability, animal welfare and high-quality pork production. We have seen positive momentum in the business in recent quarters as pork markets continue to normalize following several years of material disruption.”

Maple Leaf Foods said in a press release it will retain a 19.9 per cent ownership position in the new pork company.

“The plan to proceed with the separation has been approved by the board of directors of Maple Leaf Foods, on the recommendation of a special committee of the board composed entirely of independent directors, and has the full support of Maple Leaf Foods’ largest and controlling shareholder, McCain Capital Inc. and the McCain family,” the company said.

In an interview with the Sun on Tuesday, Maple Leaf Foods president Curtis Frank said plans for the Winnipeg plant remain unchanged, particularly in expanding its pre-cooked bacon production.

“We have moved through the startup phase of the new facility attached to Winnipeg and are now driving growth by onboarding new customers with significant demand in retail and food service channels,” he said. “Our significant investment in the Winnipeg facility is paying off and we are now in the process of taking advantage of filling our manufacturing plant with new customers.”

Frank said the 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.

Maple Leaf Foods chair Michael McCain said the decision to split the company was driven by the distinct nature of the two businesses.

“One is an upstream business with a more commodity orientation, while the other is a downstream, packaged goods branded business,” he told the Sun. “These businesses have a difficult time co-existing because the upstream business has limited growth potential and receives less capital, as shareholders prefer not to be overexposed to it. On the other hand, the downstream business should focus on brands, consumers and innovation rather than commodity markets.”

McCain added the separation will benefit both businesses.

“This is the right transaction at the right time as we move forward with our sustainability vision, seeking to create value for all stakeholders,” McCain said. “Under Curtis’s leadership, Maple Leaf Foods is on a path to deliver best-in-class consumer packaged goods performance, while the new pork company, under the leadership of Dennis, will be unleashed to leverage its unique capabilities and industry-leading performance to take advantage of new prospects for growth. “

The shareholders, he added, “will be able to participate in not one, but two strong, independent, sustainable and purpose-driven businesses, each with a clear mandate and investment profile, and all our stakeholders will participate in the shared value we will generate.”

Brandon Mayor Jeff Fawcett lauded Maple Leaf Foods’ decision to split, describing it as a welcome development for the Wheat City.

“I met with the plant manager today, who assured me it is going to be business as usual for employees,” he told the Sun. “The manager mentioned plans to bring in new equipment to upgrade the system. This move makes the new pork company very Manitoba, and it is exciting as it will provide many opportunities for expansion in Brandon.”

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