The fate of Winnipeg pea- and canola-based protein processor Merit Functional Foods won’t be confirmed until the end of April at the earliest.
Merit, whose major shareholders include Vancouver plant-based protein firm Burcon NutraScience, U.S. agrifood firm Bunge and former executives of Hemp Oil Canada, was placed into receivership March 1.
According to the first report from receiver PricewaterhouseCoopers (PwC), filed last Friday with Court of King’s Bench in Winnipeg, a “data room” has already been set up and an information brochure circulated to some prospective buyers. PwC said it also “may continue to identify and initiate contact with other such parties.”
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PwC, in its report, said it will accept “qualified offers” for Merit’s assets until 4 p.m. CT on April 21, and expects to “determine the accepted offer” by April 28.
A “definitive agreement” would then be reached by no later than May 12, court approval granted by May 26, and a deal closed by “not later than May 31.”
Burcon, which has a 31.6 per cent stake in Merit, has already announced it will bid on the Merit assets.
In a separate release Thursday, Burcon said it’s since been in discussions with the receiver, “continues to conduct due diligence and is furthering its efforts to put forth a compelling bid” to PwC for the Merit assets.
However, Burcon added, it “expects there to be other competing bids” and “there is no assurance that Burcon’s bid will be accepted by the receiver.”
Merit’s secured creditors include Export Development Canada (EDC), owed $58.6 million plus interest, fees and other costs; Farm Credit Canada (FCC), owed $36.4 million plus similar costs; and CIBC, owed $5 million plus costs. Unsecured debts owed to trades and other creditors as of March 1 were estimated at $2.4 million.
The Canadian Grain Commission is also running an audit to see if CGC-licensed Merit still has any “outstanding liabilities” owing to farmers who delivered crops to the plant, PwC said.
However, PwC added in its report, according to Merit’s records, no farmers are owed for any crops that Merit “has purchased and are in its possession.”
PwC last month laid off 77 Merit employees; kept on 23 “key” staff under agreements running mostly to the end of this month at the latest; and retained three former managers on an “independent contractor” basis.
Three of the “key” staff have since quit, while others continue to maintain the plant, handle product sales and accounts receivable and help in the sale process, PwC said.
PwC said last Friday that as of March 1, Merit had about $3.8 million worth of inventory — about $2.7 million of which has since been invoiced awaiting payment before delivery. About $231,000, or half of Merit’s other outstanding receivables, has also since been collected.
Built starting in 2019, Merit’s 94,000-square-foot plant opened in early 2021 and began accepting canola and yellow peas to process product lines such as Puratein canola proteins, Peazac pea proteins, and MeritPro protein blends using Burcon’s protein extraction technology.
In 2021 Merit had projected it would be able to eventually expand to take up to 100,000 tonnes of canola and peas per year.
EDC, FCC and CIBC were members of a consortium of lenders — also including Agriculture and Agri-Food Canada — who altogether had provided Merit with $95 million in debt financing starting in 2020. AAFC’s contribution came in the form of a 10-year, interest-free $10 million loan from the department’s AgriInnovate program.
Merit in 2020 had also picked up $9.5 million in support from the Protein Industries Canada supercluster to back product development.
EDC and FCC filed Feb. 24 for a receivership order, saying Merit was “suffering significant cash flow shortages” during the first three quarters of 2022.
The two Crown-owned lenders said in their filing that they expected Merit to run out of operating cash by around March 3 or 4 and it would then “no longer be able (to) operate its business as a going concern.” — Glacier FarmMedia Network
