Darling International To Buy Rothsay From Maple Leaf Foods For C$645 Mln

(RTTNews) - Food waste recycling company Darling International Inc. (DAR) said Friday that it has agreed to buy Rothsay, the rendering and biodiesel business of Canadian food processor Maple Leaf Foods Inc. (MFI.TO), for about C$645 million, or $611.08 million, in cash. Shares of Darling International are gaining more than 13 percent in the regular trading session following the announcement.

Darling International noted that the acquisition of Rothsay will bolster its rendering and recycling services in North America. Meanwhile, Maple Leaf Foods said that the sale of Rothsay will enable the company to focus on its consumer packaged foods market.

The transaction is expected to close by the end of 2013, subject to customary closing conditions, including review by the Canadian Competition Bureau.

Rothsay is a recycler of animal by-products in Canada and provides an essential service for the environmentally responsible collecting, processing and recapturing of edible and inedible by-products.

Rothsay processes raw materials into finished products of fats and proteins. These finished products are sold in domestic and international markets including the U.S., Europe, Mexico and South America. Rothsay also manufactures biodiesel for domestic and international markets.

Rothsay has six rendering plants in Manitoba, Ontario, Quebec and Nova Scotia, and also a biodiesel operation in Quebec, Canada. The company employs about 550 people and generated EBITDA or earnings before interest, tax, depreciation and amortization of about C$85 million over each of the past two fiscal years.

Randall Stuewe, Chairman and CEO of Darling International said, "The combination of our two companies will create North America's leading provider of independent rendering and recycling services. The opportunity to add Rothsay to our North American platform is an exceptional honor."

Irving Texas-based Darling International is a provider of rendering and bakery residuals recycling solutions to the food industry.

The company recycles beef, poultry and pork by-product streams into useable ingredients such as tallow, feed-grade fats, meat and bone meal, poultry meal and hides. In addition, the company recovers and converts used cooking oil and commercial bakery residuals into valuable feed and fuel ingredients.

Darling International expects to finance the transaction through a combination of borrowings under a new senior secured revolving credit facility and a bank loan facility that will be entered into in connection with the closing of the transaction.

BMO Capital Markets Corp. served as financial advisor to Darling International, while K&L Gates and Bennett Jones served as its legal counsel. J.P. Morgan Securities LLC will lead the debt financing.

In a separate statement, Michael McCain, President and CEO of Maple Leaf Foods said, "The sale of our rendering and biodiesel business supports our strategy to focus on effective capital deployment and profitable growth in the consumer packaged foods market. We are delighted to have concluded almost a year-long process with an agreement with Darling, the North American leader in food waste recycling."

Maple Leaf Foods plans to enter into a long-term contract with Darling to receive by-products recycling services at competitive market rates.

Maple Leaf Foods will use proceeds from the sale of Rothsay to pay down its debt. The company said that upon completion of the prepared meats strategy, its management will consider appropriate deployment of excess capital, including reinvesting in its core consumer packaged food businesses or returning excess capital to shareholders.

In Friday's regular trading session, DAR is trading at $21.88, up $2.56 or 13.25 percent on a volume of 82,553 shares.

On the Toronto Stock Exchange, MFI.TO closed Thursday's trading at C$13.39, up C$0.06 or 0.45 percent on a volume of 40,166 shares.