Pet Food Maker Considers Sale
TORONTO (Canadian Press) — Three years after Menu Foods Income Fund became the centre of a tainted pet food scandal, the company says it is considering whether to sell all or part of its assets.
The Toronto-based fund (TSX:MEW.UN), which operates Menu Foods Ltd., said Tuesday the move takes into account changes in federal tax rules for income trusts, which come into effect in 2011.
The fund noted that it could take several months to complete the evaluation and that there was no assurance that a sale, or any transaction, will result from the process.
The decision comes almost three years to the day after a massive recall of tainted pet food on March 15, 2007, which spoiled the company's relationship with some customers and ravaged its bottom line.
Menu Foods issued the widespead recall after discovering that some of its wheat gluten imported from China was laced with melamine, a deadly chemical, and that at least 350 animals in the United States and Canada died after eating it.
The private-label pet food maker has spent the past 2 1/2 years trying to recover from the recall, which prompted some of its customers to switch to other suppliers, and resulted in several lawsuits.
However, the company has seen its quarterly results start to recover.
In the fourth quarter, Manu Foods marked its best performance in three years by reversing a loss to earn $5.7 million. The profits came despite a 15 per cent drop in sales to $70.56 million as stronger Canadian dollar affected results.
At the same time, Menu Foods warned it would continue to see lower sales volumes in 2010 amid the continuing impact from customers who had previously said they were looking elsewhere for pet food products.
However, executives claim to have made significant progress in obtaining new customers.
In February, Menu Foods also announced that it had reached an agreement with lenders for a new fully underwritten credit facility to repay its debts.
The company has hired BMO Capital Markets to oversee the review of its options.
Stock in Menu Foods was up 20 cents or 6.9 per cent at $3.10 in late-day trading Tuesday on the Toronto Stock Exchange.