Maple Leaf Foods (MFI/TSX) is spinning off its pork business right into a recent publicly traded company, the corporate announced on Tuesday. Preparations have been underway for a while, but now could be the precise time, CEO Curtis Frank said in an interview. This is because of the normalization of pork markets following pandemic-related disruptions and the completion of serious investments in two production facilities, he said.
Maple Leaf’s two business units
“We operate two very successful but very different businesses – one is a consumer goods manufacturer, the other is a world-leading pork complex,” Frank said. “The opportunity to separate them to unlock value and realize their full potential was too logical to ignore, so this is a very important part of our strategic plan going forward.”
The deal will make Maple Leaf a more branded consumer goods company. The company’s portfolio will include the prepared meat business, which incorporates brands similar to Maple Leaf and Schneiders, in addition to the poultry business and the plant protein category, Frank said. The move can also be a possibility to “find the appropriate ways to restore growth in the plant protein category,” he said.
Maple Leaf desires to expand into the USA
An enormous a part of the corporate’s strategy is to expand within the U.S., Frank added. Under the plan, Maple Leaf’s existing shareholders will receive shares in the brand new company, while Maple Leaf will retain a 19.9% stake. The two firms can even enter right into a perpetual pork supply agreement, with the brand new pork company continuing to offer Maple Leaf Foods with a secure supply of pork at market prices for its prepared foods business.
The name of the brand new company is “currently being hotly debated,” said Frank.
Maple Leaf will proceed to be led by Frank, while the brand new pork company will likely be led by Dennis Organ, who joined Maple Leaf Foods as President of the Pork Complex in February 2023.
“We have a long history of success in our pork business. And we are pleased that market conditions have improved in recent quarters,” Organ said Tuesday morning in a conference call to debate the choice.
The value for investors
There are quite a few opportunities for the brand new pork company to extend its value, he said. For example, the Manitoba processing plant is currently underutilized, and so optimizing that plant is “an important strategic initiative that promises significant gains without significant capital investment,” he said.
