REGINA, Saskatchewan and MISSION, Kan. and CHESTER, Mont., Aug. 09, 2024 (GLOBE NEWSWIRE) -- Above Food Ingredients Inc. (Nasdaq: ABVE, ABVE.W) (“Above Food” or the “Company”), an innovative food company leveraging its vertically integrated supply chain to deliver differentiated ingredients and consumer products, announces that it has entered into a definitive purchase agreement to acquire the Montana-based Specialty Crop Food Ingredient Division (“Assets”) of The Redwood Group, LLC (“TRG”), for consideration of US$34,000,000 plus working capital, subject to final closing adjustments. Upon the terms and subject to the conditions set forth in the purchase agreement, the consideration payable by the Company in exchange for the Assets will consist of US$8,100,000 in cash and 5,600,000 newly issued common shares of Above Food, subject to final closing adjustments and customary closing conditions.
The Assets supply high-quality grains, pulses, and specialty crops to customers in over 35 countries in high-growth product categories in both the human and pet food markets. Its vertically integrated model spans from the farm to the consumer, encompassing origination, merchandising, processing, and value-added finishing. The Assets achieve structurally higher margins as a result of its value-added approach, differentiating it from commoditized food and ingredient suppliers, in alignment with Above Food’s strategy. In the fiscal year ended December 31, 2023, the Assets generated unaudited revenue of US$164 million and an average annual adjusted EBITDA for fiscal years 2021, 2022, and 2023 of US$5.3 million.
“This acquisition marks a major milestone for Above Food and strengthens our international footprint as our first U.S. physical facilities while also significantly growing our market share of the high-growth pet food category,” said Lionel Kambeitz, Founder, President, Chief Executive Officer, and Executive Chairman of Above Food. “TRG’s Specialty Crop Food Ingredient division operates in full harmony with our ‘Seed-to-Fork’ approach, providing us with top-tier processing and storage assets supported by end-to-end quality assurance, product development and safety protocols, while bringing strong relationships with growers, suppliers, and customers. It is a complete business with origination partners that are similarly utilizing sustainable farming practices that are consistent with our Canadian growers, which establishes broader reach across North America that we can leverage for the benefit of our shareholders.”
“The sale of our Specialty Crop Food Ingredient Division represents a significant milestone in The Redwood Group’s growth,” said Mike Kincaid, founder and President of TRG. “This is a bittersweet moment in our history, yet represents a tremendous opportunity for personal and professional growth for our teams in Mission, Kansas and Chester, Montana to join an organization principally focused on specialty crops and value-add opportunities in the region as well as globally. Above Food is adding a well-led group of hardworking innovators, who I expect to continue flourishing and immediately improve utilization and expand the margin structure of several of Above Food’s assets. We are grateful for our team of people who helped build this business and are thankful for the Above Food team’s thoughtful approach to this acquisition.”
Above Food’s Seed-to-Fork approach is central to the Company's strategic positioning, enabling it to maintain control over its entire supply chain, ensuring that its standards for quality, sustainability, safety, and traceability are upheld while sustaining its commitment to regenerative agriculture for the long-term health, resilience, and security of the food supply. By integrating owned production and processing facilities, efficient logistics, and direct distribution channels, Above Food drives strong margins and operational efficiencies.
Strategic and Financial Highlights
- Expands Above Food’s North American market penetration in large, high-growth markets with an emphasis on pet food – Ideally positioned to capture growth stemming from robust demand for sustainably produced plant-based human food and pet food, representing total addressable markets of approximately US$202 billion and US$26 billion, respectively. Pet food represents approximately 40% of TRG’s Specialty Crop Food Ingredient division’s sales.
- Delivers direct customer relationships and strong value-added capabilities, driving margin optimization – Extensive investments in processing systems offer the opportunity to scale production volumes further. Further, its value-added capabilities meet the needs of its direct customers, allowing for participation in the most attractive market segments and concurrently mitigating lower-margin sales channels.
- Exclusive, diverse, and long-standing supplier network – Vast origination network in the heart of the North American pulse-growing region, including an established footprint of both owned and exclusive third-party partner facilities. Multi-generational relationships with growers afford the Asset’s unique origination advantages, surety and consistency of supply, and differentiated crop cycle insights. This allows for better mitigation of risk around localized crop conditions and the creation of unique supply chain arbitrage, which translates into margin upside.
- Multi-faceted and actionable organic growth opportunities – Near-term opportunities to drive scale across the current backlog of customer demand for new differentiated products. The recent addition of a new company-controlled facility in Stanford, Montana (with an option to purchase later) provides additional processing capacity and supports the expansion of its export business with deeper penetration into the European market.
- Asset-light infrastructure and advantaged operating model – The Assets maintain a portfolio of both owned facilities and third-party facilities under exclusive, long-term, and renewable agreements. Its third-party capacity offers benefits of outright ownership and balance sheet flexibility without the burdens of capital expenditures, maintenance costs, and operational staffing needs. Its durable operating model is also enabled by agreements that transfer risk in non-commodity components of the variable cost structure (such as freight) to the counterparty to insulate margins further.
Capital One Securities acted as exclusive financial advisor to The Redwood Group LLC on the transaction.
