Maple Leaf Foods is selling its pork business to a new publicly traded company, the company announced Tuesday.
This split has been in the works for a while, but the time is now right, Maple Leaf Foods CEO Curtis Frank said in an interview.
This is due to the normalization of pork markets after pandemic-related disruptions and the completion of significant capital investments in two manufacturing facilities, he explained.
“We will operate two very successful but very distinct businesses: one is a consumer packaged goods company, the other is a leading global pork complex,” Frank said.
“The opportunity to separate them to unlock value and unleash their full potential made too much sense to ignore, so it’s a very important part of our strategic plan going forward.”
With the deal, Maple Leaf Foods said it will become a more brand-focused consumer packaged goods company.
The company’s portfolio will go forward to include the prepared meats business, which is home to brands like Maple Leaf and Schneiders, the poultry business, and the plant-based protein category, Frank said.
This shift is also an opportunity to “find the right pathways to restore growth in the plant protein category,” he said.
A big part of the company’s strategy is to expand in the United States, the CEO added.
Under the plan, existing Maple Leaf shareholders will receive shares in the new company, while Maple Leaf will retain a 19.9% stake.
The two companies will also enter into a permanent pork supply agreement, with the new pork business continuing to provide Maple Leaf Foods with a guaranteed supply of pork at market prices for its prepared foods business.
“Improved” conditions
The name of the new company is currently the subject of heated debate, Curtis Frank said.
The executive will continue to serve as CEO of Maple Leaf Foods, while the new pork business will be led by Dennis Organ, who joined Maple Leaf Foods in February 2023 as president of the pork complex.
“We have a strong track record of profitability in our hog business. And we’re excited that market conditions have improved over the last several quarters,” Organ said on a conference call discussing the decision Tuesday morning.
There are multiple opportunities for the new pork business to create value, he said. For example, the Manitoba processing plant is currently operating below capacity, so optimizing that facility “is a key strategic initiative that promises substantial returns without significant capital investment,” he said.
The plan has been approved by the company’s board of directors and has the support of Maple Leaf Foods’ largest majority shareholder, McCain Capital, as well as the McCain family.
Maple Leaf Foods executive chairman Michael McCain said it was the right deal at the right time.
“It would have been incredibly difficult to complete this transaction during the pandemic or in the post-pandemic economy,” he said on the conference call.
“But we’re getting through it, we’re recovering from this dysfunction. And you see it in the quarterly results. So the timing is perfect right now.”
In May, Maple Leaf Foods reported a first-quarter profit, compared with a loss a year earlier, helped by improving pork markets.
The transaction, which is also subject to shareholder approval, is expected to close in 2025.
Maple Leaf shares were up nearly 9% at close of trading on the Toronto Stock Exchange, at $24.40.