SunOpta draws private equity interest, 2nd activist emerges-sources
By John Tilak and Lauren Hirsch
July 25 (Reuters) - Canadian organic food company SunOpta Inc, already
under pressure from U.S. hedge fund Tourbillon Capital Partners LP, is
being prodded by a second activist shareholder to explore the sale of
all or part of the company, according to sources familiar with the
matter.
Canadian hedge fund West Face Capital, which pushed SNC-Lavalin to sell
its AltaLink business for about C$3.1 billion in 2014, also wants
SunOpta to look at board or management changes if sales don't
materialize, said the sources who spoke on condition of anonymity.
West Face's move comes as SunOpta, whose brands include Nature's Finest
and Sunrich Naturals, has received interest from private equity firms,
said two sources familiar with the situation.
While some of Toronto-based West Face's demands are similar to
Tourbillon's, the two hedge funds are not acting in concert, the sources
said.
West Face, SunOpta's third biggest shareholder with a more than 8
percent stake, began the push about a year ago but has kept it private,
one source said. Tourbillon, SunOpta's largest stakeholder, went public
with a May 27 letter to the board and chief executive officer.
SunOpta and West Face declined to comment.
Investors have been disappointed with SunOpta's share price, which is
down nearly 48 percent over the past year. Some shareholders are
concerned about the debt level, the integration of acquisitions and
SunOpta's sluggish performance in the high-growth organic foods market,
the sources said.
Last month, SunOpta's board hired investment bank Rothschild Inc and law
firm Davies Ward Phillips & Vineberg LLP to advise on strategic options
and said it was in talks with its biggest shareholders.
SunOpta's debt jumped to $482.8 million in 2015 from $83 million a year
earlier after the acquisitions of Citrusource, Niagara Natural and
Sunrise Growers.
A sale at less than C$8 per share is unlikely to be acceptable to some
of the major shareholders, one source said, adding that an asset sale
was more likely in the near term.
The stock was down 2.1 percent at C$6.54 on Monday.
SunOpta set ambitious goals in April for gross margin and sales,
including raising its overall gross margin to between 14 percent to 16
percent within three to five years from the current 11 percent, said
Eric Gottlieb, an analyst at D.A. Davidson & Co.
"They've made all these promises throughout the years, and they haven't
come through," he said. Now the shareholders' approach is, 'let me see
you do it,'" he added.
A strategic buyer, such as grain handler Archer Daniels Midland Co, the
food processor and commodities trader, or Bunge Ltd, the agribusiness
group, may be interested in buying SunOpta for its ingredient sourcing
segment and then sell its consumer products division, Gottlieb said.
ADM declined to comment. Bunge could not be reached immediately for
comment.
(Reporting by John Tilak in Toronto, Rod Nickel in Winnipeg, Lauren
Hirsch and Michael Flaherty in New York; Editing by Jeffrey Benkoe)
