Update: Merit Functional Foods was placed in receivership on March 1. Read more here.
Creditors for Merit Functional Foods are asking the Court of King’s Bench in Manitoba to appoint a receiver for the plant protein processing company.
Export Development Canada and Farm Credit Canada have filed an application for the appointment of a receiver, according to a notice distributed by Burcon NutraScience Corporation, which owns a 31.6 per cent share of Merit.
The court hearing is scheduled to take place on March 1.
Merit was founded in 2019 as a joint venture between Burcon, which owns a patented protein extraction technology, and several food industry veterans. Construction on a 94-thousand square foot plant on the west side of Winnipeg started in the fall of 2019. The facility, designed to extract food-grade protein from peas and canola to be used in baked goods, meat and egg alternatives, and other food products, was commissioned in 2021, with a projected price tag of $150 million.
The company received $9.2 million in funding from the federal government’s Protein Industries Canada supercluster, and $90 million in loans and repayable contributions from Farm Credit Canada, Export Development Canada, and Agriculture and Agri-Food Canada’s AgriInnovate Program. The federal financing for Merit was announced by Prime Minister Justin Trudeau in June 2020.
In August 2020, the Manitoba and federal governments announced $2.5 million in cost-shared funding for Merit’s equipment purchases, with the provincial government contributing $1 million for cost-shared training activities and a rebate of up to $4.5-million over a maximum of 20 years through the Manitoba Works Capital Incentive (MWCI) Program.
Bunge Limited also invested $30 million for a minority stake in Merit in 2020.
Merit originally expected to purchase 10,000 metric tonnes of yellow peas and 17,000 tonnes of canola seed in its first year, with plans to grow demand to over 100 thousand tonnes annually.
In a letter to Burcon shareholders on February 8, CEO Kip Underwood said Merit had made “significant progress” over the past six months. “Daily production performance has improved while sales continue to increase as compared to prior year… Unfortunately, the overall financial performance of the business has fallen short of expectations and led to the current cash flow concerns,” he wrote.
Underwood also said Merit was in the process of identifying a new strategic investor for its business.
As of February 28, Burcon says it intends to continue discussions with Merit’s lenders “in order to seek a potential funding solution for Merit’s business.”