WINNIPEG, MANITOBA, CANADA — Ag Growth International Inc. (AGI) has agreed to purchase the outstanding shares of Milltec Machinery Limited for $109.5 million, with the potential for up to an additional $38.4 million based on earning targets.
Milltec, based in Bangalore, India, is a leading manufacturer of rice milling and processing equipment in India. It has 400 full-time employees and operates four production facilities in India, three of them in Bangalore, and one in Chennai.
“Milltec is a launching pad for AGI in India and the broader Asian region with a complete product line for rice as well as providing the manufacturing, design, engineering, service and installation capabilities that AGI will leverage across our current product lines,” said Tim Close, AGI president and chief executive officer. “This comprehensive platform brings a talented management group, excellent manufacturing facilities, pan-India distribution and service teams, as well as turn-key systems capabilities.”
AGI said it will fund the purchase with its revolving credit facility. Milltec reported sales of $56.2 million and earnings before interest, income, tax, deprecation and amortization of $10.1 million for the 12 months ended Jan. 31.
Ravindranath Ramaiah and Rajendran Joghee founded Milltec in 1998 and each have over 25 years of experience in the rice milling equipment industry. They will continue to provide leadership and vision to Milltec going forward in their roles as managing directors of the company. Over the past few years Milltec has also bolstered its management team with the addition of two very experienced individuals, Rajan Aggarwal, chief executive officer, and Ganapathy Subramaniam, chief financial officer.
Completion of the transaction is subject to customary conditions precedent and is expected to close prior to March 31.
The acquisition fits with AGI’s 5-6-7 strategy, the company said, noting that it moves AGI into rice processing with a complete product line and establishes AGI’s platform in India. It is also complementary to AGI’s existing product offerings and provides a strategic platform for further consolidation.
In addition, AGI said it has identified several opportunities for sales, operational and supply chain synergies including the service and support of AGI’s current product lines through Milltec’s pan-India distribution platform, the sale of Milltec’s products across AGI’s established global distribution network, and significant advantages in engineering support.
Rising income in India and the ability to purchase higher quality and branded rice is rapidly increasing the size of the rice processing equipment market.
Growth drivers identified, including: (i) As incomes rise in India consumers are choosing to purchase higher quality, and branded, rice products which is rapidly increasing the size of the rice processing equipment market; (ii) Milltec has recently expanded into pulses and seed equipment adding another lever for growth in the region; and (iii) The additional access to capital that AGI provides will support both domestic and export growth.
Milltec’s equipment offerings include:
· Front-end equipment: pre-cleaners, boilers, parboilers and dryers.
· Milling equipment: classifiers, gravity separators, de-stoners, pneumatic shellers, thickness graders, whiteners, silky polishers, rotary sifters and length graders.
· End-of-line equipment: color sorters, packaging equipment with a capacity range of 10 to 75 kilograms.
Milltec also offers end-to-end turnkey solutions for rice processing activities. It has also expanded its product portfolio to include pulse, seed, maize and wheat processing equipment as well as ancillary products including silica extraction and co-generation plants.