SunOpta Inc. is selling its global ingredients business for about $389 million, a dramatic slimming down of its portfolio in the company's ongoing turnaround efforts.
By selling the business, its largest at 40% of its total revenue, SunOpta is effectively abdicating its position within the organic commodities market.
The company, which moved its headquarters from suburban Toronto to Edina, announced last week it had reached the sale agreement with Netherlands-based Amsterdam Commodities N.V.
"It's an incredibly diverse business," said Joe Ennen, chief executive of SunOpta. "We were the ones sourcing those organic ingredients around the world. That whole commodity sourcing business is what we sold, so we are principally now a packaged goods business."
SunOpta's global ingredients unit identifies land and crops to convert to organic, then sources, processes and sells the raw foodstuffs to food manufacturers.
Commodities, however, are a lower margin part of the supply chain and SunOpta — saddled with some expensive debt — has struggled to maintain profitability for several years. Ennen set the company on a turnaround path when he was appointed CEO in April 2019.
"The thing that was getting in the way was we are trying to do too many things. Five years ago we were making baby food pouches, we were milling corn and soy, we were in crazy categories where we had no right to win," Ennen said. "I've come in and focused on a couple of core platforms and put the people, resources, money and the right team behind it. We've really simplified it down to fruit-based foods and plant-based foods."
SunOpta's stock has risen 250% in the last year.
When the sale finalizes in January, SunOpta will use the proceeds to pay down debt, add capacity to its existing products and look to other acquisitions that would align with its higher-margin plant-based foods.
"We consider the sale to be strategically sound," wrote Jon Andersen, an analyst with William Blair & Co., in a note. "The transaction should enhance SunOpta's long-term growth profile by focusing the portfolio on categories with above-average and sustainable growth dynamics."
The company is in the midst of aggressively expanding its production of oat milk with a $26 million upgrade to its facility in Alexandria, Minn. Sales of oat milk shot up 247% last year, according to provided Nielsen data, making it the second-most popular milk alternative behind almond milk, which SunOpta also makes.
SunOpta posted $1.2 billion in revenue last year.