WINNIPEG, Manitoba (Reuters) - Maple Leaf Foods (MFI.TO), one of Canada's biggest hog processors and bakers, is buying distressed hog producer Puratone Corporation to secure hog supplies as farmers struggle to manage heavy losses.
Maple Leaf will pay C$42 million ($42 million) for Puratone, based in the western Canadian province of Manitoba, in a deal expected to close within a month, Maple Leaf said on Thursday.
Soaring grain costs, due to the severe U.S. drought, have caused North American hog farmers to incur losses of as much as C$50 for every pig they raise, forcing some to exit the industry.
Maple Leaf runs a hog processing plant in Brandon, Manitoba. Farmers' heavy losses have packers concerned about finding enough pigs to slaughter.
"This acquisition will ensure a consistent supply of hogs to our processing facility in Brandon, which is an integral supplier to our value-added prepared meats and pork business," said Maple Leaf CEO Michael McCain, in a statement.
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Puratone, which raises 500,000 hogs annually, entered court protection from creditors in September. It owes a total of C$86 million to three secured creditors.
With the acquisition, Maple Leaf will produce 1.2 million hogs annually including its own production, allowing it to own about 30 percent of its hog supply for the Brandon plant.
Maple Leaf also gets Puratone's three feed mills.
Shares of Maple Leaf ended up 0.2 percent in Toronto.
Big Sky Farms, a 1 million pig operation based in Saskatchewan, is also in play. The receiver for the company is accepting bids until November 9.
Privately held Olymel LP, Maple Leaf's main Canadian hog-processing rival, has offered C$65 million for Big Sky.
Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bob Burgdorfer