AGI announces $85 million offering of senior subordinated unsecured debentures
Winnipeg, MB, February 13, 2020 – Ag Growth International Inc. (TSX: AFN) (“AGI” or the “Company”) announced today that it has reached an agreement with a syndicate of underwriters led by CIBC Capital Markets, National Bank Financial Inc., RBC Capital Markets and Scotiabank (the “Underwriters”), pursuant to which AGI will issue on a “bought deal” basis, subject to regulatory approval, $85,000,000 aggregate principal amount of senior subordinated unsecured debentures (the “Debentures”) at a price of $1,000 per Debenture (the “Offering”). AGI has also granted to the Underwriters an over-allotment option, exercisable in whole or in part for a period expiring 30 days following closing, to purchase up to an additional $12,750,000 aggregate principal amount of Debentures at the same price. If the over-allotment option is fully exercised, the total gross proceeds from the Offering to AGI will be $97,750,000.
The net proceeds of the Offering will be used to repay indebtedness and for general corporate purposes.
A preliminary short form prospectus qualifying the distribution of the Debentures will be filed with the securities regulatory authorities in each of the provinces of Canada (other than Quebec). Closing of the Offering is expected to occur on or about March 5, 2020. The Offering is subject to normal regulatory approvals, including approval of the Toronto Stock Exchange.
The Debentures will bear interest from the date of issue at 5.25% per annum, payable semi-annually in arrears on June 30 and December 31 each year commencing June 30, 2020. The Debentures will have a maturity date of December 31, 2026.
The Debentures will not be redeemable by the Company before December 31, 2022, except upon the occurrence of a change of control of the Company in accordance with the terms of the indenture (the "Indenture") governing the Debentures. On and after December 31, 2022 and prior to December 31, 2023, the Debentures may be redeemed at the Company’s option at a price equal to 103.9375% of their principal amount plus accrued and unpaid interest. On and after December 31, 2023 and prior to December 31, 2024, the Debentures may be redeemed at the Company’s option at a price equal to 102.625% of their principal amount plus accrued and unpaid interest. On and after December 31, 2024 and prior to December 31, 2025, the Debentures may be redeemed at the Company’s option at a price equal to 101.3125% of their principal amount plus accrued and unpaid interest. On and after December 31, 2025 and prior to maturity, the Debentures will be redeemable at the Company’s option at a price equal to their principal amount plus accrued and unpaid interest.
The Company will have the option to satisfy its obligation to repay the principal amount of the Debentures due at redemption or maturity by issuing and delivering that number of freely tradeable common shares in accordance with the terms of the Indenture.
The Debentures will not be convertible into common shares of the Company at the option of the holders at any time.
This press release is not an offer of Debentures for sale in the United States. The Debentures may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933, as amended, or an exemption from such registration. The Company has not registered and will not register the Debentures under the U.S. Securities Act of 1933, as amended. The Company does not intend to engage in a public offering of Debentures in the United States. This press release shall not constitute an offer to sell, nor shall there be any sale of, the Debentures in any jurisdiction in which such offer, solicitation or sale would be unlawful.
2020 Outlook
Management reaffirms its positive outlook for 2020. In 2019, AGI demonstrated the success of its AGI SureTrack subscription model by increasing retail equivalent sales by 70%, and as we enter 2020 that growth rate has accelerated as AGI builds on existing relationships with processors, merchandisers, grain buyers and producers throughout North America. In the fourth quarter of 2019, AGI recorded negative adjusted EBITDA1 of $2.7 million related to the investment in its growing technology platform and management plans to invest further in 2020 to accelerate growth of the platform. In addition, management expects demand for Farm products to increase with the new planting season in the second quarter of 2020 due to an anticipated increase in U.S. planted acres, improved weather conditions compared to historically poor conditions in 2019 and better farmer economics and sentiment should the U.S. and China fully implement Phase 1 of a trade agreement. The Company’s early order programs for its Farm products are at robust levels, supporting management’s positive view for 2020. Offshore, management expects continued growth in India and Brazil, and anticipates an improvement in the global trade environment will result in increased demand in its Commercial business. AGI’s international backlog is well above the levels experienced at the same time in 2019. Commercial project bookings picked up at the end of 2019 following a pause caused by global trade tensions and has resulted in project completion more heavily weighted to the second half of 2020 as these projects go through final design, manufacturing and execution. Accordingly, management expects sales and adjusted EBITDA to also be more heavily weighted toward the second half of 2020 as compared to prior years. In summary, Farm and Commercial backlogs are very strong and management expects sales and adjusted EBITDA in fiscal 2020 to significantly exceed 2019 results.
Company Profile
AGI is a leading provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, and feed systems with a growing platform in providing equipment and solutions for food processing facilities. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, France, Italy, and India and distributes its product globally.
Further information can be found in the disclosure documents filed by AGI with the securities regulatory authorities, available at www.sedar.com and on AGI's website www.aggrowth.com.
For More Information Contact:
Investor Relations
Steve Sommerfeld
204-489-1855
1 See Non-IFRS Measures.
CAUTIONARY STATEMENTS
Preliminary Unaudited Financial Information
The Company's expectations for fourth quarter 2019 EBITDA related to investment in its growing technology platform are based on, among other things, AGI's financial results for the three months and year ended December 31, 2019. AGI's financial results for the three months and year ended December 31, 2019, have not yet been finalized or approved and as such, such estimates and guidance are subject to the same limitations and risks as discussed under Forward-Looking Information set out below. Accordingly, AGI's guidance for the three months and year ended December 31, 2019, may change upon the completion, audit and approval of the financial statements for such periods and the changes could be material.
Forward-Looking Information
This news release contains forward-looking statements and information (collectively, "forward-looking information") within the meaning of applicable securities laws that reflect the Company's expectations regarding its future growth, results of operations, performance, business prospects, and opportunities. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words “anticipate”, “believe”, “continue”, “could”, “estimate”, "expect”, “intend”, “plans”, "postulates", "predict", “should”, “will” or similar expressions suggesting future conditions or events or the negative of these terms are generally intended to identify forward-looking information. Forward-looking information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. In particular, the forward-looking information in this press release includes information relating to AGI's business and strategy, including, the Company's expectations for: fourth quarter 2019 EBITDA related to investment in its growing technology platform; AGI SureTrack historical and future sales and sales growth; financial and operating performance in 2020 including expectations for future financial results including sales and adjusted EBITDA, industry demand and market conditions; and the proposed timing of completion of the Offering and the anticipated use of the net proceeds of the Offering. Such forward-looking information reflects AGI's current beliefs and is based on information currently available to us, including certain key expectations and assumptions concerning: anticipated grain production in AGI's market areas; financial performance; the financial and operating attributes of recently acquired businesses and the anticipated future performance thereof and contributions therefrom; business prospects; strategies; product and input pricing; regulatory developments; tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; political events; currency exchange and interest rates; the cost of materials; labour and services; the value of businesses and assets and liabilities assumed pursuant to recent acquisitions; the impact of competition; the general stability of the economic and regulatory environment in which AGI operates; the timely receipt of any required regulatory and third party approvals; the ability of AGI to obtain and retain qualified staff and services in a timely and cost efficient manner; the timing and payment of dividends; the ability of AGI to obtain financing on acceptable terms; the regulatory framework in the jurisdictions in which AGI operates; the ability of AGI to successfully market its products and services; the estimated costs associated with the equipment supplied including the total cost of project rework and any additional associated costs.
Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking information, including changes in international, national and local macroeconomic and business conditions, as well as sociopolitical conditions in certain local or regional markets, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, the ability of management to execute AGI’s business plan, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange and interest rates, the availability of credit for customers, competition, AGI’s failure to achieve the expected benefits of recent acquisitions including to realize anticipated synergies and margin improvements; changes in trade relations between the countries in which AGI does business and elsewhere including between Canada and the United States and between the United States and China; changes in the estimate of the costs associated with the rework of equipment supplied including the potential for additional associated or incidental costs and liabilities; the finalization of AGI's financial statements for the three months and year ended December 31, 2019; and the failure or delay in satisfying any of the conditions to the completion of the Offering. These risks and uncertainties are described under “Risks and Uncertainties” in AGI's Q3 MD&A, annual MD&A and in our most recently filed Annual Information Form, all of which are available under AGI's profile on SEDAR [www.sedar.com]. These factors should be considered carefully, and readers should not place undue reliance on AGI’s forward-looking information. AGI cannot assure readers that actual results will be consistent with this forward-looking information. Readers are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. These estimates may change, having either a negative or positive effect on profit and other financial information, as further information becomes available and as the economic environment changes. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date of this press release and AGI undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
Non-IFRS Measures
In analyzing the Company's results, AGI supplements its use of financial measures that are calculated and presented in accordance with International Financial Reporting Standards ("IFRS") with a number of non-IFRS financial measures including “EBITDA” and “adjusted EBITDA”. A non-IFRS financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes [includes] amounts, or is subject to adjustments that have the effect of excluding [including] amounts, that are included [excluded] in the most directly comparable measures calculated and presented in accordance with IFRS. Non-IFRS financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar businesses. AGI strongly encourages investors to review its consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
AGI uses these non-IFRS financial measures in addition to, and in conjunction with, results presented in accordance with IFRS. These non-IFRS financial measures reflect an additional way of viewing aspects of its operations that, when viewed with the Company's IFRS results and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of factors and trends affecting AGI's business.
Management believes that the Company's financial results may provide a more complete understanding of factors and trends affecting its business and be more meaningful to management, investors, analysts and other interested parties when certain aspects of its financial results are adjusted for the gain (loss) on foreign exchange and other operating expenses and income. These measurements are non-IFRS measurements. Management uses the non-IFRS adjusted financial results and non-IFRS financial measures to measure and evaluate the performance of the business and when discussing results with the Board of Directors, analysts, investors, banks and other interested parties. Reconciliations of historical non-IFRS financial measures to the most directly comparable historical IFRS financial measures are contained in AGI's previously filed management’s discussion and analysis.
References to “EBITDA” are to profit before income taxes, finance costs, depreciation, amortization and AGI’s share of Associate’s net income (loss). References to “adjusted EBITDA” are to EBITDA before the gain or loss on foreign exchange, non-cash share based compensation expenses, gain or loss on financial instruments, M&A expenses, other transaction and transitional costs, gain or loss on the sale of property, plant & equipment, gain or loss on disposal of assets held for sale, fair value of inventory from acquisitions, impairment and equipment rework. Management believes that, in addition to profit or loss, EBITDA and adjusted EBITDA are useful supplemental measures in evaluating the Company’s performance. Management cautions investors that EBITDA and adjusted EBITDA should not replace profit or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company’s liquidity and cash flows.