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Merit Functional Foods operates a new protein extraction plant in Winnipeg, Canada
Merit Functional Foods operates a protein extraction plant in Winnipeg, Canada making pea and canola proteins. Image credit: Merit

Receiver sets April 21 deadline for offers for plant protein processor Merit Functional Foods

March 29, 2023

Parties interested in bidding for distressed plant protein processor Merit Functional Foods have until April 21 to submit an offer, says receiver PriceWaterhouseCoopers (PwC), which took over Merit’s plant in Winnipeg, Canada on March 1 after key lenders filed an application to place the firm in receivership.

According to a sales process summary document filed by PwC on Monday, qualified bidders who can prove they “have the financial ability to complete the transaction,” can commence due diligence, visit the site and speak to management. PwC will select a bidder by April 28, with court approval obtained by May 26, and the transaction completed by May 31.

PwC would not say how much interest it has received in the plant. Burcon — Merit’s biggest shareholder —  is thus far the only firm to state publicly that it plans to submit an offer, claiming it is “in a unique position to bring Merit’s business to profitability.”

Merit’s plant, which became operational in 2021, has a capacity of 4,000 metric tons for canola and pea proteins, and has received C$200 million ($147 million) in investment. It is scalable to 10,000 tons within the existing footprint, which would cost a further C$130 million ($96 million) , according to a document issued by PwC on March 13.  

Merit ‘couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough’

Founded in 2019, Merit produces high-purity proteins using patented processes developed by Burcon that enable formulators to include higher levels of plant protein isolates in challenging applications such as low pH beverages without negatively impacting flavor or texture.

While the proteins “have been formulated into countless products globally,” said Merit co-CEO Ryan Bracken in LinkedIn post last month, Merit “couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough.”

Burcon is the leading shareholder in Merit with a 31.6% stake; Bunge acquired a 25% stake for C $30 million in mid-2020. Around the same time, the Canadian government invested almost C$100 million ($72 million), including C$9.2 million ($6.7 million) from Protein Industries Canada and C$90 million ($65 million) in debt financing.

Merit generated revenues of C$3million ($2.2 million) in the third quarter of fiscal 2023 (ending December 31, 2022), up 146% year-on-year. However, it had also “incurred cumulative losses and cash flow deficiencies that have adversely impacted its financial situation and liquidity position,” said Burcon, which itself posted a net loss of C$16.3 million ($11.8 million) in the quarter.

According to PwC, Merit owes federal lending agencies Export Development Canada and Farm Credit Canada C$58.6 million ($42.4 million) and C$36.5 million ($26.4 million) respectively, with an additional C$5 million ($3.6m) owed to the Canadian Imperial Bank of Commerce. Merit’s assets total C$137.6 million ($99.7 million), with the bulk tied up in property and equipment.

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