Correction: This story was updated July 27, 2017 to clarify the ownership of Highland Sugarworks and that it was founded by Judy MacIsaac Robertson and Jim MacIsaac in the fall of 1991.
by Timothy McQuiston Vermont Business Magazine The Canadian owner of one of Vermont’s most recognizable maple syrup bottlers has been sold to one of Canada’s leading food companies. Rogers Sugar Inc announced July 10 the acquisition of L.B. Maple Treat Corporation, the parent company of Highland Sugarworks in Websterville, for $126.35 million (CD $160.3).
Rogers (TSX: RSI), based in Vancouver with $444.9 million (CD $564.4 million) in revenues in 2016, bought L.B. Maple Treat from the Montreal private equity firm Champlain Financial Corporation Inc in 2015.
L.B. Maple Treat, based in Granby, QC, purchased Highland Sugarworks last September.
This is the latest of several transitions for Highland Sugarworks.
Legendary syrup maker Jim MacIsaac began sugaring on his family's property in Starksboro in 1986 as an all-natural, organic maple sugar operation. Highland Sugarworks, Inc was co-founded by Judy MacIsaac Robertson and Jim MacIsaac in the fall of 1991.
Judy sold her shares to Jim in 2005 to begin her consulting career, following their 2003 divorce. Jim MacIsaac retained sole ownership, expanded the business and used maple syrup from suppliers from across New England.
In 2009, he moved the processing facility into a 37,600-square-foot facility in Websterville. In November 2011 MacIsaac was killed in a logging accident in Starksboro as he tended to his sugarbush.
His partner, Karen Kennedy, took over the business and in September 2016 sold it to L.B. Maple Treat, for an undisclosed sum, as reported by lapresse.ca. Maple Treat then gained a valuable foothold of production and distribution in the US market.
Kennedy left the company and its now 23 employees earlier this year and was succeeded by coffee veteran Pierre Gagnon.
The Montreal native is now a US citizen and resident of Boston who came to the States for a job and stayed. He took over as CEO in January. But even being from Quebec, he was never involved in the raucous maple industry before being named a VP at LBMT.
“It’s a very passionate industry,” Gagnon said.
Highland Sugarworks provides branded and private label, all-natural maple syrup products that are distributed directly to the retail and wholesale market channels. It is known for its high quality products and innovative packaging.
L.B. Maple Treat had been looking for an American partner for some time and in 2011 reportedly had sought to buy Bascom’s, one of the largest maple syrup distributors out of Alstead, NH, according to Douglas Whynott in his 2014 book, “The Sugar Season, A Year in the Life of Maple Syrup, and One Family’s Quest for the Sweetest Harvest.”
Whynott said that at the time of MacIsaac’s tragic death that Highland “was coming on fast.” Bruce Bascom told Whynott that, “They lost their fearless leader,” and wondered about the future of the company.
In a memoriam to MacIsaac shortly after his death, Chris Crocker wrote: “I'd come to learn that Specialty Food people generally fall into two groups: those who are behind their products, either creating, sourcing or producing them, and those who are out in front, focused on marketing and sales. Jim was definitely behind Highland Sugarworks’ products… He knew intrinsically what it took to run a sugaring operation, from the sugarbush through the production process. He was an honest trader, begrudgingly respected as a tough negotiator, and was known to travel deep into the North Woods of Maine to meet a producer, grade syrup and put a cash down payment on a season’s production.”
Highland has indeed survived and Gagnon said revenue is up about 12 percent.
“It’s a very good business to grow with,” said Gagnon, who has retained his French accent and good humor. He spent 37 years in the coffee industry and figured it was time to move back to Montreal when a previous contract concluded. But his daughters refused to go back, so he stayed in Boston and works from there.
Of now being in the maple business after so many years in coffee, he said, “It’s different.”
He anticipates future growth for highland will come from expanding the product line from just selling syrup that’s “not just for breakfast.” This, he said, will come from educating chefs and others in the vast food industry about the many uses for maple syrup.
And, Gagnon said, “It’s healthy.”
He is looking to grow the business through products like salad dressings and using maple more in cooking. Markets would expand and margins would be greater, he said. Gagnon said it’s not enough for Vermont producers to try and crowd each other off the shelves at the local Hannaford’s.
“I don’t want to compete against Butternut and Bascom,” he said.
His belief is that all Vermont producers are also striving toward the same goal of expanding the local industry outside of the state.
Gagnon said 85 percent of Highlands syrup is sourced from Vermont.
“I have a lot of respect for all these players,” Gagnon said. Expanding markets “is only going to help everybody.”
He even admits to liking the sweeter Vermont syrup more than the product of his native Quebec.
Canada still owns the bigger retail and international markets because the US simply doesn’t produce enough to supply the likes of Kroger and Walmart and Costco, here or abroad.
Quebec is by far the largest producer of maple products in the world and Vermont is by far the largest producer in the United States.
Quebec alone produces 71 percent of the world total. Vermont is the second largest region in the world, but far behind Quebec.
Meanwhile, maple is going gangbusters.
Quebec, for instance, had its biggest year yet in 2017, with 152.2 million pounds (13.8 million gallons, seven times Vermont’s total) of maple syrup from 44.2 million taps, which was also a record.
This past season's maple syrup production in Vermont of 1.98 million gallons (5.4 million taps) is still twice the size of any other state and 46 percent of the entire production in the United States.
Vermont boasted its two most productive maple syrup seasons in just the last two years, with 2017 just shy of 2016’s all-time record.
In 2015, Vermont produced 1.4 million gallons, in 2016 and 2017 the state produced almost 2 million gallons – a jump of over 40 percent, or 500,000 gallons, in just one year. The value of that increase was over $13 million: $46.5 million to $59.7 million.
The total value (retail, wholesale and bulk) will not be available until next year, but based on average sales from last year, the 2017 Vermont crop will be worth about $59.4 million. Retail represents only about 10 percent of Vermont production.
Price per gallon for retail sales is about $47.40 in Vermont. Retail alone is worth about $9.4 million. Bulk sales represent over 80 percent of total sales, but at a lower price point ($25.40 per gallon in 2016).
The 2017 United States maple syrup production totaled 4.27 million gallons, up 2 percent from the previous year. The number of taps is estimated at 13.3 million, up 6 percent from the 2016 total. Yield per tap is estimated to be 0.320 gallon, down 4 percent from the previous season.
Producers were encouraged to tap earlier this season by the warmer than normal temperatures. The earliest sap flow reported was January 1 in Indiana, New York, Ohio, and Vermont. The latest sap flow reported to open the season was February 12 in Minnesota. On average, the season lasted 37 days, compared with 33 days in 2016.
The 2016 United States average price per gallon was $35 (Vermont $30), down $1.70 from 2015. Value of production, at $147 million for 2016, was up 17 percent from the previous season.
New York and Maine are the second and third largest producers in the United States.
All producers have benefited in recent years from technological advances, which include vacuum pumps that can suck sap out of the tree and reverse-osmosis machines that reduce moisture content, which saves on fuel and boiling times (30 minutes from two hours “sugaring off”).
Gagnon said that Highland’s private label business, for the likes of Williams Sonoma and others, includes bottling part of its Maine-produced syrup for LL Bean.
The acquisition of Highland by LBMT was not the first outside acquisition of a major Vermont maple syrup firm, of course.
B&G Foods Inc, whose brands include Green Giant, Ortega and, of all things, Vermont Maid syrup, also owns Maple Grove Farms, based in St Johnsbury. Maple Grove Farms, on its website, says, “We are proud to be the largest packer of Pure Maple Syrup in the USA, one of the largest manufacturers of Maple Candies in the world, and a national producer of gourmet specialty salad dressings.”
Meanwhile, L.B. Maple Treat was taking advantage of a growing international appeal of “all natural” products.
Unlike in Vermont, however, Quebec has strict regulation on maple production, much to the chagrin of producers, some of whom, according to financialpost.com engage in a black market of syrup trading “worse than drugs.”
The Quebec Federation of Maple Producers acts in a way similar to OPEC, according to the financialpost.com story, by attempting to control production and worldwide prices.
By limiting production, the Federation keeps prices inflated, which in turn helps Vermont producers make more money and encourages more production.
Rogers Sugar is the largest sweetener company in Canada with both cane and beet production, as well as non-sugar sweeteners.
The acquisition allows Rogers Sugar to enter the maple syrup market with a leading position and a premier platform that is well-positioned to benefit from favorable market trends and a fragmented industry, Rogers said in a statement.
Worldwide consumption of maple syrup has grown at a high-single digit rate since 2010 as consumer preferences shift towards adopting food & beverages based on natural ingredients and sweeteners.
It holds all of the common shares of Lantic Inc, which operates cane sugar refineries in Montréal and Vancouver, as well as the only Canadian sugar beet processing facility, in Taber, Alberta. Lantic’s sugar products are marketed under the “Lantic” trademark in eastern Canada and the “Rogers” trademark in western Canada and include granulated, icing, cube, yellow and brown sugars, liquid sugars and specialty syrups.
To finance the transaction, Rogers entered into an agreement with a syndicate of underwriters to raise approximately $110 million (CD) of subscription receipts and extendible convertible unsecured subordinated debentures on a bought deal basis as well as an agreement with selected banks in its existing banking syndicate to increase the corporation's revolving facility by $75 million to $275 million.
“This transaction is significant for Rogers Sugar. It adds product reach in a natural sweetener category with attractive growth, it provides strong stand-alone economics, it will improve Rogers Sugar free cash flow, it should be quickly accretive and is expected to add shareholder value. The management teams of Rogers, LBMT and Champlain have worked very effectively and cooperatively to advance this transaction” said Dallas Ross, Chair of the Board of Rogers and Lantic Inc in a press release.
Key Transaction Highlights
- Unique opportunity to become a global market leader in growing maple syrup industry
- Investment brings an additional natural sweetener platform with attractive organic growth and acquisition opportunities in a fragmented market
- Maple syrup part of a growing worldwide trend towards alternative natural sweeteners
- Complements Rogers Sugar’s retail and foodservice relationships
- Opportunity to expand Rogers Sugar’s industrial customer relationships and increase applications of maple syrup as a natural sweetener
- Transaction to be financed with a mix of debt, subscription receipts and convertible debentures
- Deal structure and leverage ratios allow Rogers Sugar to pursue further acquisitions
- Transaction expected to provide approximately 10% accretion to Rogers Sugar’s free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction
“This sizable and strategic transaction is a game changer for Rogers Sugar. The acquisition of LBMT will allow us to diversify into the large and growing market of maple syrup, a natural sweetener, with one of the leaders in the industry. This new platform will provide us with opportunities to grow organically, leverage sales and operational gains, and look at other acquisitions. The financing structure put in place permits us to maintain a solid balance sheet,” said John Holliday, President and Chief Executive Officer of Rogers Sugar and Lantic Inc.
“Rogers Sugar is a perfect fit with L.B. Maple Treat because our organizations already share a number of business partners, and we intend to enhance and expand these essential relationships. As a result of our business combination, our customers and partners will now have access to an extraordinary portfolio of products, distribution and production capabilities across North America, Europe and Asia. Our group remains focused on its vision of offering an unparalleled level of reliability, flexibility, and leadership in the maple syrup industry”, said Daniel Cousineau, President of LBMT.
L.B. Maple Treat, with over 160 employees, began serving customers in 1975 with a vision of offering an unparalleled level of reliability, flexibility and customer service. Customers and partners have access to an extraordinary portfolio of products, distribution and production capabilities across North America, Europe and Asia.
Its Quebec crops are managed by more than 1,400 maple syrup. The company owns the L.B. Maple Treat, Uncle Luke's, Highland Sugarworks and Great Northern brands.
LBMT has two bottling plants in Quebec. The corporation is supported by distribution centers in eastern and western Canada, the US and Australia.
LBMT is supported by distribution centers in Eastern and Western Canada, the US and Australia. For the period ended March 31, 2017, LBMT’s products were sold in the US (~50%), Canada (~15%) and internationally (~35%). For the same period, private label and branded products accounted for approximately 85% and 15% of total sales, respectively.
LBMT represents an amalgamation of four independent companies, three of which were acquired over the past year.
For the trailing twelve month period ended March 31, 2017, LBMT generated CD $154 million in revenue and CD $18.41 million in Adjusted Pro Forma EBITDA, which includes approximately CD $2.9 million of recent customer and operational gains.
These gains, which management expects to be fully reflected by September 30, 2018, include newly awarded contracts, procurement efficiencies, redistribution of production lines and reduction of maple syrup losses.
Management of Rogers Sugar said it expects that the LBMT transaction will bring further organizational capabilities, which it expects to materialize in additional integration gains of approximately $2.1 million, expected to be fully realized by September 30, 2019.
The $160.3 million purchase price represents implied acquisition multiples of approximately 8.7x Adjusted Pro Forma EBITDA of $18.4 million and approximately 7.8x Adjusted Pro Forma EBITDA of $20.5 million, assuming the realization of all expected Rogers Sugar's integration gains.
The Transaction is expected to provide approximately 10% accretion to Rogers Sugar’s free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction.
Champlain acquired LBMT in 2015 with a consortium of investors that included Daniel Cousineau, president of L.B. Maple Treat and set the company on a course solidifying its position as the industry leader.
"It's been a real privilege to work with the management of LBMT over the past couple of years in helping to build and strengthen the platform. Although our departure from the business and industry is bittersweet, we're thrilled that the ownership remains in strong local hands determined to continue to grow the company on the worldwide stage from right here in Quebec," said Scott Jackson, Partner of Champlain Financial Corporation in a press release.
"We are thankful to Champlain for helping set us on a winning path. We are very excited about our future, as Lantic truly is a perfect fit for LBMT. We will continue to operate our business separately from the Granby headquarters while enjoying Lantic's support and collaboration. Our strong relationships with more than 1,400 maple syrup partners/producers who are dedicated to harvesting the highest quality maple syrup in the world and the support of the Federation des producteurs acericoles du Quebec, make us confident in our ability to meet the challenges of continued growth with the quality, reliability and flexibility our customers have come to expect," said Cousineau.
"We are very proud to have LBMT and its employees join the Lantic family. Our Montreal-based company is celebrating its 125th anniversary and has a long-term vision and perspective with regards to its operation. LBMT has a long-standing history of delivering high-quality products to sophisticated customers who expect the best-a tradition we look forward to furthering and building upon. Their expertise and industry leadership will allow us to diversify into the large and growing maple syrup market in rapid fashion," said Holliday.
Champlain and LBMT were advised by Fasken Martineau DuMoulin LLP on this transaction. Lantic/Rogers was advised by TD Securities Inc. and Davies Ward Phillips & Vineberg LLP. The transaction is subject to customary closing and regulatory conditions and is expected to close in the third quarter of this calendar year.
Champlain Financial Corporation, a Canadian private holding company based in Montreal, Quebec, operates a private investment portfolio, currently with a series of investments throughout Canada. Champlain's core focus is to serve as a value-added partner in providing equity capital, financing and operational management expertise for small and middle-market companies aspiring to grow within and beyond Canada.
Rogers Sugar Inc holds all of the common shares of Lantic Inc, which operates cane sugar refineries in Montreal, Quebec and Vancouver, British Columbia, as well as the only Canadian sugar beet processing facility, in Taber, Alberta. Lantic Inc.'s sugar products are marketed under the "Lantic" trademark in eastern Canada and the "Rogers" trademark in western Canada and include granulated, icing, cube, yellow and brown sugars, liquid sugars and specialty syrups.
Long standing partnerships with 1,400+ producers provide LBMT with the lowest cost of acquisition, premium quality, and no reliance on strategic reserves. Long-lasting relationships with producers have allowed LBMT to develop a market leadership position for organic maple syrup.
Maple syrup bottlers will continue to benefit from the Fédération des producteurs acéricoles du Québec (FPAQ) monetary support in market development and growth. FPAQ has spent in excess of $35 million from 2004 to 2015 in promoting and marketing maple syrup.
The opportunity to leverage Rogers Sugar’s existing strong retail and foodservice presence will capitalize on Rogers Sugar's current marketing efforts and solidify the Corporation's value-added sweetener portfolio.
The Transaction is expected to provide approximately 10% accretion to Rogers Sugar’s free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction.
Maple syrup is organic, and gluten-free. According to various sources, global demand for pure maple syrup has been growing at a compounded annual growth rate of 8% since 2010. Industry growth can be attributed to both new market penetration and increased per capita consumption. The size of the global wholesale market for maple syrup-based products is estimated to be $750 million.
“We are confident that L.B. Maple Treat will continue to have significant success under the existing industry environment which offers price stability through regulation and marketing support to Québec maple syrup producers with FPAQ's strong commitment to continue to support market development and growth,” said John Holliday, President and Chief Executive Officer of Rogers Sugar and Lantic Inc.
The existing environment provides maple syrup bottlers like LBMT with a number of advantages including price stability, access to the maple syrup strategic reserve in case of unplanned demand, favorable payment terms which reduce bottlers' working capital requirements, ability to return excess inventory to the FPAQ and traceability of syrup.
To finance the Transaction, the Corporation has entered into an agreement with a syndicate of underwriters co-led by TD Securities Inc and BMO Capital Markets, pursuant to which Rogers Sugar will issue on a bought deal basis subscription receipts for gross proceeds of $60 million at a price of $5.90 per Subscription Receipt and $50 million aggregate principal amount of extendible convertible unsecured subordinated debentures at a price of $1,000 per debenture.
Rogers Sugar has granted the Underwriters over-allotment options to purchase up to an additional approximate $9.0 million of Subscription Receipts and up to an additional $7.5 million aggregate principal amount of Debentures, on the same terms and conditions as the Equity and the Debenture Offering, respectively, to cover over-allotments.
The Subscription Receipts and the Debentures will be offered in all provinces of Canada pursuant to a short form prospectus to be filed by Rogers Sugar. In addition, the Subscription Receipts and the Debentures may be offered in the United States in transactions exempt from registration under the U.S. Securities Act of 1933 and applicable state securities laws. Closing of the Offering is expected to occur on or about July 28, 2017.