Winnipeg-based Farmers Edge eyeing its options

When Farmers Edge shares began trading in March 2021 there was plenty of optimism around one of the first independent precision farming enterprises to hit the market.

Those newly minted shares closed at $18 after its first day, but it has been downhill ever since then.

Late last week the Winnipeg-based digital farming company’s largest shareholder, Fairfax Financial Holdings Ltd., notified the board that it has made a proposal to buy back all the shares it does not already own for $0.25 per share and take the company private.

The price Fairfax is proposing is just shy of 99 per cent less than that opening day of trading.

Company officials would not comment on the report, but the announcement came shortly after another disappointing quarterly report released earlier this month where the company recorded a net loss of $17.9 million (which was better than the $22.1 million it lost during the third quarter of 2022).

The company said its board of directors has formed a special committee of independent directors to evaluate the proposal and to explore potential alternatives with no set timetable.

The company has stated that no decision has been made and discussions with Fairfax are at a preliminary stage.

Fairfax already owns 61.4 per cent of Farmers Edge shares and it has been helping to finance the company through the losses that have been consistent since going public.

Last week it increased its loan to the company by $6.37 million to $81.37 million.

This new development comes as the company seeks to cut its 2022 operating expenses in half by the end of 2024.

Among other things it has recently exited its market presence in Ukraine, Russia and Australia but continues to develop its growing business in Brazil. In addition to closing those overseas operations, it has been cutting staff across its operations for about a year now.

Last year co-founder and then CEO Wade Barnes stepped down. New management that has been brought in are largely based outside Winnipeg. New CEO Vibhore Arora was appointed last year — he is the former president of Amazon Canada Fulfillment Services — and some of his close lieutenants are based in Vancouver. According to sources, most of its IT team are now based in the U.S.

The company, which was founded in 2004, was one of the first agri-tech companies in the Prairies to make noise in the precision agriculture space with a broad range of proprietary technologies involving hardware, software and services designed to make agriculture more efficient and produce higher yields.

One of Farmers Edge’s competitive features was the fact that it was equipment agnostic, giving it independence from the Big Ag companies like John Deere and Bayer who have competing services in the market.

Part of its original strategy was to capture market share by encouraging farmers to try the service at no cost for a year and then convert as many of them — ideally 70-to-75 per cent — to paying customers as soon as possible.

But that has not been working out. At one point the company boasted 20 million acres of coverage but in its latest financial releases that number is significantly lower and continues to decline. In its third quarter results released earlier this month it stated its digital agronomy acres fell year over year by 46.7 per cent to 5,189,000 acres. The company has stated that plans are in place to reverse this trend in the future

Revenue continues to head south, as well. Third-quarter sales were $4,427,000, 25.5 per cent lower than the same period last year and through the first nine months of this year revenue is trailing last year by 28 per cent.

In a release accompanying its third quarter results released about a week before Fairfax’s proposal to take the company private, company CEO Arora said, “In the third quarter, we made significant improvements in adjusted free cash flow and adjusted EBITDA, while putting the building blocks in place to expand our top-line in the future.” .

He said a new deal with Claro, one of Latin America’s largest telecommunications providers, to introduce Farmers Edge digital solutions to the Brazilian agricultural community is hoped to enhance rural internet connectivity and expand Farmers Edge’s exposure in that market by several hundred thousand acres.

“The strategic partnership with Claro demonstrates our commitment to driving revenue growth,” Arora said. “We are confident that this deal marks the beginning of our revenue turnaround.”

martin.cash@freepress.mb.ca