UP TO DATE 1-SunOpta draws private equity interest, 2nd activist emerges-sources

<articleLocation” > Canadian natural food company SunOpta Inc (SOY.TO), already under pressure from U.S. hedge fund Tourbillon Capital Partners LP, is being prodded by a 2nd activist investor to check out the sale of all or part of the business, according to sources familiar with the matter. Canadian hedge fund West Face Capital, which pressed SNC-Lavalin (SNC.TO) to sell its AltaLink business for about C$ 3.1 billion in 2014, likewise wants SunOpta to look at board or management changes if sales do not materialize, stated the sources who spoke on condition of anonymity. West Face’s move comes as SunOpta, whose brand names include Nature’s Very best and Sunrich Naturals, has received interest from personal equity companies, stated 2 sources knowledgeable about the situation. While some of Toronto-based West Face’s needs resemble Tourbillon’s, the two hedge funds are not acting in concert, the sources said. West Face, SunOpta’s third biggest investor with a more than 8 percent stake, started the push about a year ago however has kept it personal, one source stated. Tourbillon, SunOpta’s biggest stakeholder, went public with a Might 27 letter to the board and president. SunOpta and West Face decreased to comment.

Financiers have actually been disappointed with SunOpta’s share cost, which is down almost 48 percent over the previous year. Some investors are concerned about the debt level, the integration of acquisitions and SunOpta’s sluggish efficiency in the high-growth organic foods market, the sources said. After the Reuters report, SunOpta shares shot up as much as 6.3 percent to C$ 7.10 before reducing to C$ 6.92. Prior to the report, the stock was down about 2 percent. Last month, SunOpta’s board hired investment bank Rothschild Inc and law firm Davies Ward Phillips & & Vineberg LLP to advise on tactical choices and stated it remained in talks with its biggest shareholders.

SunOpta’s debt jumped to $482.8 million in 2015 from $83 million a year earlier after the acquisitions of Citrusource, Niagara Natural and Sunrise Growers. A sale at less than C$ 8 per share is not likely to be acceptable to a few of the major investors, one source said, including that an asset sale was more likely in the near term. The stock was down 2.1 percent at C$ 6.54 on Monday.

SunOpta set enthusiastic goals in April for gross margin and sales, consisting of raising its overall gross margin to in between 14 percent to 16 percent within 3 to five years from the current 11 percent, said Eric Gottlieb, an analyst at D.A. Davidson & & Co. “They’ve made all these guarantees throughout the years, and they haven’t come through,” he stated. Now the shareholders’ technique is, ‘let me see you do it,'” he added. A tactical purchaser, such as grain handler Archer Daniels Midland Co (ADM.N), the food processor and products trader, or Bunge Ltd (BG.N), the agribusiness group, may be interested in purchasing SunOpta for its component sourcing section then offer its consumer products division, Gottlieb stated. ADM declined to comment. Bunge might not be reached immediately for remark. (Reporting by John Tilak in Toronto, Rod Nickel in Winnipeg, Lauren Hirsch and Michael Flaherty in New york city; Editing by Jeffrey Benkoe).

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