Material from July 17, 1996 issue

Bid made for control of Sun-Rype

BY KATHLEEN CONNOLLY

Sun-Rype shareholders are being urged to wait for word from their board of directors before making any decision regarding the bid by Clearly Canadian to take over the grower-owned juice company.

Beverage-maker Clearly Canadian made the $40 million offer to buy controlling interest in the company last week. Since then, Clearly Canadian executives have been touring the Okanagan promoting the offer to the B.C. Fruit Growers' Association members and Sun-Rype employees who hold shares in the company. A meeting, open only to Sun-Rype shareholders, was held in Oliver Tuesday evening.

In the meantime, the Sun-Rype board has met extensively to discuss the offer and has engaged an outside consultant to review the proposal. In a letter sent to all shareholders, Sun-Rype chairman Merv Geen urged growers to "carefully evaluate the offer, since it is in everyone's best interest to understand its true value."

Geen promised shareholders that a "specific recommendation" about accepting or rejecting the offer will be made by the end of this week.

"In the meantime, there is no need to panic or make a quick decision to tender your shares," Geen said of the offer which expires Aug. 7.

A choice of two offers is open to Sun-Rype owners. Shareholders can either exchange one Sun-Rype share for one full Clearly Canadian common share; or receive $1.61 per Sun-Rype share plus one-half of a Clearly Canadian common share. Clearly Canadian shares were recently evaluated at $3.74.

Clearly Canadian trades on both the Vancouver Stock Exchange and NASDAQ. The Vancouver-based company currently distributes four different beverage brands in 60 countries and claims to have annual sales of approximately $65 million. Information on the company states Clearly Canadian has assets of more than $50 million, including $10 million in cash reserves. The firm currently employees 71 full-time workers across North America.

Sun-Rype, which was established 50 years ago, employs 250 people and has annual sales in excess of $70 million. The company offers a market for cull fruit produced in orchards owned by BCFGA members.

"This offer provides a significant premium to Sun-Rype's shareholders. We expect the combination of these two B.C.-based beverage companies will improve our competitiveness and increase our mutual profitability in the international beverage industry," Clearly Canadian president Doug Mason said last week.

It's that message that Mason has been personally delivering to Okanagan orchardists in a series of meetings held from Vernon to Oliver.

"Obviously, the product mix and talent is going to make both companies more profitable in the long run... it's a unique opportunity that will be win-win for both companies: a marriage made in heaven," Mason said Friday.

Mason, who has also met privately with some growers and shareholders, said the main concerns of growers is that the market remain for their cull fruit and that Sun-Rype operations stay in the Okanagan. Mason vowed to continue Sun-Rype's relationship with the growers.

"That's in concrete... We will continue to buy apples. What we want is the security of ongoing operations. What we're buying is that relationship. We will stay in the Okanagan. There would be no sense in dismantling (the Okanagan operations)," Mason said. "Good equipment and good employees are what (Sun-Rype) is bringing to the party."

He said expanding international markets will "increase profitability and that will provide job security" for Sun-Rype workers.

Mason said he is pleased with the response the company is getting from shareholders.

"Most people we spoke with were elated that Sun-Rype may finally go public and they will be able to sell shares at a nice premium."

Mason stressed that the offer to purchase is only for a majority interest in Sun-Rype.

"We don't want a minority interest. Our offer is subject to controlling interest," he said.

Oliver orchardist and BCFGA executive member Pedro Barata met with Mason last week. Speaking as a grower and Sun-Rype shareholder, he said he has not yet made a decision about his shares.

"I checked their financial statements and their stock has been erratic, to say the least. It's been up to $30 and down to $1.70. I'm sitting back and waiting," Barata said.

He also expressed his concern about a future market for juice apples.

"Of course we worry about that. No matter what we do we will always have culls."

However as a BCFGA director, Barata said he is waiting for the board to make a statement.

"We're reviewing the deal right now... it's interesting."

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Canal tab to be paid

What could have been a million dollar error by the Town of Oliver has been resolved with a "slap on the hand" and a promise never to make the same mistake again, Mayor Rick Wilson said Thursday.

But a move by council to change plans for irrigation canal rehabilitation without the permission of the Ministry of Municipal Affairs has still taken a $30,000 bite out of the canal rehab budget.

The province has withheld its one-third payment of canal construction work for about three months since the town altered its construction plans. The delay of the $1.29 million payment has resulted in interest charges of about $300 per day. The full cost of the $5 million rehabilitation project is to be split equally between the province, the town and the federal government.

"The very tight design schedule resulted in a failure to inform the province of the intended design change before construction," Wilson admitted last month.

Since that time, council has been lobbying for a meeting with the Canada/B.C. Infrastructure Works management committee to present its case and to ask that payment be made. The two sides met July 9 and it was determined the $1.29 million would be paid, provided council agreed to a series of conditions.

"The (management committee) has reviewed this matter with some concern... Given that the work performed to date has achieved the desired objective of the approved project, the province is prepared to pay for the claims already submitted," Wilson was told in a letter dated July 10.

The letter was to be signed by town council to signify acceptance of the conditions. The document was returned to the province Thursday. Wilson is confident a cheque will be disbursed immediately.

Council has agreed that no more work will be undertaken on the canal without providing a detailed work plan to the province, with any changes to be approved in writing. Council also agreed that any unresolved issues with the Osoyoos Indian Band regarding right-of-way and taxation must be settled before the next phase of the project can begin.

Wilson noted north canal rehabilitation will be the next project undertaken and negotiations are now under way with the Band. But, he said, "the province is really the one who has to resolve these issues... we're at their mercy to resolve them in a timely fashion so we can get on with it."

Wilson said council will "work diligently during the summer" to resolve issues with the province and the band.

"We do have some concerns about that but we're confident we'll work our way through it."

The mayor noted the $30,000 lost in interest payments will be paid through the canal rehabilitation budget.

"We won't do $30,000 worth of work on the canal, it will be used to offset this (expense). But I don't think this will jeopardize the canal in any way," Wilson said.

Wilson also vowed to "follow the letter of law" in future dealings with the infrastructure program.

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Town limits role in RDOS planning

Moves by Osoyoos and Penticton to opt out of the regional district area planning fund have spurred Oliver town council to cap its contribution to the program.

Council agreed at its last regular meeting that it will support the fund, but only to a maximum of $3,212 - the town's share of the $423,000 fund before Osoyoos and Penticton decided to withdraw. Contributing to the fund allows the town "a voice" in planning matters that occur within the Regional District of Okanagan-Similkameen but outside of Oliver's municipal boundaries.

"We're opting out of the planning function for 1997 but we're willing to negotiate a rate not to exceed the rate we paid in 1996... it gives the municipality a vote and input on fringe area development," Mayor Rick Wilson told council July 8.

By opting out of the program, Penticton and Osoyoos no longer have a say in development that occurs around them. Penticton was expected to make a contribution of $25,427 in 1997; the share assessed to Osoyoos was $3,623. Rural areas pay considerably more for planning: 90 per cent of the total. The Okanagan Falls/Kaledan area makes the largest contribution, budgeted at $114,529 for 1997. The Oliver rural area payment was levied at $47,464.

With the withdrawal of Penticton and Osoyoos, Wilson, who is also the chairman of the regional district, said the fees for all other districts could increase, and, he said, no one is pleased by that prospect.

"All the municipalities I talked to will opt out but will put a dollar figure (cap) on it," he said.

Wilson said the future of the planning fund will depend on the rural areas.

"They'll end up funding more of it."

But Wilson is adamant that Oliver should have some input on planning matters.

"We need to know what's going on in our fringe areas. This gives us the opportunity to review and a vote at the board table. That is very, very important. I think it's well worth the $3,200 we pay for that voice," Wilson said.

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Editorial for week of July 16, 1996

The issue of how the regional district, its municipalities and rural areas fund planning activities is a perennial problem. Originally sold on the idea of doing all their planning through the regional district for efficiency and cost saving, the various municipalities have, from time to time, opted in and out of participating in the regional district planning function since it was started many years ago.

The rural areas have no alternative but to do their planning through the regional district. They have no city hall to take over the work. The municipalities have options, however, and have occasionally exercised that option. We are in the midst of another swing of the pendulum with Osoyoos and Penticton opting out which leaves a funding crisis for those remaining.

The Town of Oliver has decided to remain in a very limited way having voted to cap their contribution at $3,200.

There is a very positive side to regional planning that should not be ignored. Over the years it has had the effect of bringing some uniformity to the way zoning classification and various bylaws are written. This can only make things easier for those attempting to build or develop. It has also greatly assisted in giving the municipalities some consistency and control over development in their fringe areas that are outside their jurisdictions. We hope the directors on the regional board will continue to subject the planning efforts to a regional view. The municipalities won't serve their citizens well by being too myopic in their approach to planning needs.