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TORONTO, ONTARIO (CP) -- Arkansas-based Simmons Pet Food Inc. has agreed to pay $239 million to acquire Menu Foods Income Fund, a Toronto-area company involved in a massive recall of pet food three years ago.

The transaction, announced early Monday, comes after the Mississauga, Ont. company carried out a strategic review and put itself up for sale.

Menu Foods recalled at least 60 million cans and pouches of pet food in 2007 after contaminated products from China got into the company's supply chain and caused some animal deaths.

The company survived but the recall cost it tens of millions of dollars, produced big losses, led to cancelled contracts and battered its stock price.

The company said Monday that investors and other owners of about 45 per cent of Menu Foods stock have agreed to sell their shares to Simmons in the friendly deal.

"We have conducted an extensive review of the strategic alternatives available to the fund and believe this transaction provides our unitholders with an attractive price for the business and a material premium to the recent trading levels of the units," C. Ian Ross, chairman of the board, said in a release before stock markets opened Monday.

After the disposition of the fund's assets, the units of the fund will be redeemed for $4.80 per unit in cash.

That represents a 65.5 per cent premium to the March 15 closing price of $2.90, the last trading day prior to the Fund's announcement that it would begin a strategic review.

The share price is also a 46.8 per cent premium to the closing price of $3.27 on August 6.

The deal is subject to the approval of the fund's unitholders by two-thirds of the votes cast at a special meeting, expected to be held in September. The sale is expected to close in the fourth quarter.

"With this transaction, we are adding one of North America's leading private label pet food manufacturers to our portfolio and further strengthening our company," said said Mark Simmons, chairman of Simmons Foods Inc. and affiliates.

"Menu is a great company with an excellent management team and employees that are among the best in our industry, and we look forward to welcoming them into the Simmons family."

Menu Foods Income Fund is the indirect owner of Menu Foods Ltd., a leading private-label contract-manufacturer of dog and cat foods.

The Simmons group includes Simmons Pet Food, a manufacturer of wet and dry pet food, and dry ingredients for dairy, cattle, aquaculture and pet food manufacturers.

Simmons has annual sales of more than US$1 billion.

In March, 2007, investigators banned imports of wheat gluten from the Xuzhou Anying Biologic Technology Development Co. in China after finding melamine -- a chemical used in plastics, countertops, glue and fertilizers -- in samples of recalled wet and dry pet food and treats.

The chemical was also found in cats who died after eating the contaminated food.

Several other pet food makers in North America had to recall pet food after receiving contaminated wheat gluten from the same source.

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