(Reuters) - Privately held Olymel LP, one of the largest Canadian hog processors, has offered to buy Canada’s second-largest hog producer out of receivership for C$65.25 million ($66.58 million).
Big Sky, which produces about 1 million pigs per year and is based near Humboldt, Saskatchewan, entered receivership in early September after piling up C$69 million in debt to secured creditors. Soaring feed costs left the company unable to pay its bills.
“It’s a strategic possible acquisition for us,” said Richard Vigneault, spokesman for Montreal-based Olymel, which currently does not raise hogs, on Thursday. “Big Sky is already one of our suppliers and we want to secure our supplies.”
Other bidders can make offers for Big Sky until November 9, followed by due diligence, an auction process that can include raised bids, and the receiver approving a winning offer in mid-January, according to court documents. The sale process goes before a Saskatchewan court on Friday for approval.
If there are no other offers by November 9, the sale with Olymel will close, said the receiver, Ernst & Young senior vice-president Kevin Brennan.
But Brennan expects more offers, with Canadian packer Maple Leaf Foods MFI.TO and some U.S. meat companies expressing interest.
“I think we’ll get fairly robust interest, given the scale and how efficient an operator Big Sky is,” Brennan said.
A Maple Leaf spokesman could not be immediately reached.
A severe drought in the United States has decimated crops this year, which has led to higher costs for grains used to feed pigs. Rising feed costs have prompted some farmers to liquidate their herds, putting short-term pressure on hog prices and making losses worse for the remaining North American hog farmers.
Canada is the world’s third-largest pork exporter.
Manitoba-based hog producer Puratone Corporation is also up for sale, after entering court protection from creditors last month.
Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Sofina Mirza-Reid