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Agrifoods

Agrifoods. Discussion Points and Analysis. Agrifoods Overview. Agrifoods Status Shareholder Value Four Logical Options Discussion Points Risk Management Shared Interests and Disclosure Special committee participation Partnership discussions Information request. Agrifoods Status.

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Agrifoods

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  1. Agrifoods Discussion Points and Analysis

  2. Agrifoods Overview • Agrifoods Status • Shareholder Value • Four Logical Options • Discussion Points • Risk Management • Shared Interests and Disclosure • Special committee participation • Partnership discussions • Information request

  3. Agrifoods Status • Started as a cooperative movement; events transpired: • Saputo take over • Agropur -Ultima law suit • Today • Active in transportation • Passive financial investor in Ultima and in Cooperators Insurance • Agrifoods today does not serve the purposes for which it was created • Majority of Agrifoods’ value is derived from businesses which it does not operate or add value to member’s products • Some members feel that the board has to consider strategic direction of Agrifoods taking into account its fiduciary duty to maximize value shareholder value

  4. Shareholder Value • 15,000 shares • Current value: $22,500 • Based on current share exchange of $1.50/share • Book value: $37,500 • Based on financial statements at $2.50 / share • Market value: $112,500 • Based on 2007 PWC assessment at ~$7.50 / share • Unrealized value: $90,000 or 80% discount • How can the Board eliminate the discount to PWC’s valuation?

  5. Four Logical Options • Role of the board/delegates is to examine which of the four broad strategies maximize shareholder value (need to be open-minded): • Do nothing: • distribute net income and cash balances to shareholders each year • Sell assets: • distribute proceeds to shareholders • Independent growth: • make acquisitions with cash and/or debt that are accretive to share price • Partnership-based growth: • make acquisitions with strategic partners which are accretive to share price

  6. Discussion Points

  7. Discussion Points

  8. Risk Management • New strategy has potentially unrealistic or risky objectives ($10 to 50 million net income in 5 years) • What is Agrifoods’ competitive advantage? • Strategy and process? • Ability of the Board and management to identify and deliver on acquisitions and achieve the target rates of return? • Framework to distribute cash if no suitable investments are discovered? • What is the strategy for the board to maximize shareholder value? • Example strategies... • Share buyback • Reduce tax payables • Dividend distribution can viewed as tangible value to shareholders (increase in perceived value of shares)

  9. Shared Interests and Disclosure Deep interest in the strategic direction of Agrifoods as a significant shareholder • Serve on special finance committee (Section 15.3 and 15.4 of Bylaws) • Consider growth opportunities and options • Ultima takeover model (example) • Discuss potential partnership opportunities • Nutriva Group (Nutritech/Nutrifoods) • Why partner with Agrifoods vs. other potential partners? • Formal request as a member • Review Ultima financials and JV related agreements including the license agreement between Yoplait and Agropur • This information is critical to me as an Agrifoods member and shareholder in determining share value

  10. Why the Agrifoods Interest Group? • Intended to be a positive tool to increase communication and interest among members and shareholders • Advocate for members/ shareholders • Founding members are losing out- not able to extract market value and at risk of not getting dividends in the future • Not really functioning as a cooperative any more “Although originally formed as a cooperative, many feel Agrifoods has not maintained the intent of a cooperative” • Increase communication and interest- currently there is a high level of apathy among members • Shared interests • I have invested in shares along with industry friends and family • Time and money spent researching

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