By Brent Banda
Photograph by Stuart Kasdorf
“I should tell you about the time we lost $50 million in the radio business,” says Tom McLellan through a mischievous grin. McLellan is in his element, reminiscing about an exceptional career leading one of Saskatoon’s most successful companies.
A humble man, McLellan is quick to point out failures in his time with Agra Industries Ltd. But Agra’s success stories are far more common. Over a period of nearly thirty years while McLellan was involved, the company grew into a highly diversified conglomerate with operations around the world. The business owned seventy operating companies and thirty holding companies. Combined revenues when McLellan left the business in 1988 totalled $231 million. Adjusted for inflation, that is comparable to just over $400 million today. And it all started with a small engineering firm based in Saskatoon.
The early years
Ben Torchinsky, a young engineer from Calgary, came to Saskatoon in the early 1950s and taught in the College of Engineering at the University of Saskatchewan. In 1952, Torchinsky founded what is now Agra as B.B. Torchinsky and Associates. This civil engineering firm pioneered, in Saskatchewan, the use of deep piles to support heavy structures such as bridges and large buildings.
In 1954, Torchinsky supervised an Ontario company as it constructed the foundation for a hospital in Prince Albert. Realizing there were no contractors able to do this work in western Canada, Torchinsky borrowed $5,000 from his father to buy a broken-down drilling rig. He now owned a construction company.
Tom McLellan began working with Torchinsky in 1960 as controller to add structure and support to the business, which was expanding rapidly – Torchinsky was a natural entrepreneur. The business branched into road engineering and began doing work in Alberta and Manitoba. Torchinsky had also started a cable TV company. “When I was hired, they were building a 1,000 foot tower in Weyburn,” McLellan explains. “Ben’s best friend was a technical genius and he had figured out a way to capture television signals from the US and distribute the programming to homeowners by coaxial cable.”
Growth through diversification
Torchinsky and McLellan continued to diversify into new businesses. “In 1960, a promoter convinced Torchinsky to buy $5,000 worth of shares in a startup business called Agra Vegetable Oil Products,” McLellan says. “He came back a few times. Pretty soon we had $50,000 into this thing. We realized we owned a major position in a company that had also sold shares to 200 farmers. With 200 shareholders we met the criteria for a public company. That’s how we went public – by accident.”
With controlling interest in this new business, Torchinsky and McLellan built an oilseed crushing plant in Nipawin and in a few years were making margarine in four plants across Canada. Agra had become the largest Canadian crusher and processor of rapeseed (now called canola).
Torchinsky moved to Toronto to be closer to Bay Street. McLellan recalls, “We had all these businesses and only one that was public, the vegetable oil business. The stock brokers said we should roll all the businesses into one, which we did. So we changed the name to Agra Industries.”
Agra was a pioneer in several businesses. In the early 1970s, it had the 7Up and Pepsi Cola franchise for southern Alberta and was among the first pop franchises in North America to recycle glass bottles and cans. Because of this experience, Agra was awarded the recycling contract for half of California and set up 700 facilities in six months. The business spent $25 million before it started to break even.
In the late 1970s, Agra teamed with Allders International of England and operated airport duty-free stores in cities such as Toronto, Calgary, and Vancouver.
“We merged our cable TV business with a company in Toronto called Cybermedix Inc., which was the second largest medical testing business in Canada,” McLellan recalls. “Cybermedix issued us enough shares that we ended up owning two-thirds of the medical business and two-thirds of our cable business. Cybermedix was then listed on the Toronto Stock Exchange and was very successful.”
“We also had a steel plant in Vancouver and built a few rides for Disney. We built structures for some of the large observatory telescopes in Hawaii.”
As McLellan describes it, they often bought companies, and each deal was unique. Negotiating with entrepreneurs who had built their own companies could be difficult. “These old ducks did not want to leave the business world, so we kept them on as president so they could keep their office but we had a manager in place.”
Woven through McLellan’s stories are valuable business lessons. “We built cable TV stations all over Canada and had an opportunity to expand in Chicago. With a game that big there is a lot of politics. You have to convince the right people that you can do the work. I’m happy to say we operated ethically, and in all my years I never saw a dollar bill go under the table. We won the Chicago contract. We spent $110 million building the cable TV system for fourteen Chicago suburbs. It was supposed to cost us $70 million. I was the poor sucker who worked with the bankers to raise the other $40 million.”
Stories like McLellan’s experience in Chicago point to the sophistication of Agra’s operations. But other stories are worth telling for entertainment value alone. As McLellan explains, “One day we were working on a job site in Washington, DC, near the White House, building what would become the wall of the subway system’s underground tunnel. We were drilling and wire started coming up. Within five minutes we were surrounded by FBI agents. It was telephone wire. We knocked out Nixon’s hotline to Russia!”
The engineering and construction business continued to expand. McLellan went to Kuwait in 1975 and finalized a deal with a sheikh who would serve as the local partner. Agra was working in Iraq in 1980 when the war broke out with Iran.
I had the ability to get people to work hard for me, probably because they saw me work hard. They said I was tough but fair.
Managing the business
As the business evolved, so did McLellan’s role. Torchinsky was president and chairman of the board. McLellan was a board member and executive vice president, and in later years acted as chief operations officer. Eventually four vice presidents were in place to manage a portfolio of companies.
Torchinsky may have moved to Toronto, but Agra’s head office stayed in Saskatoon and eventually took up the whole top floor of the Midtown Plaza office tower. McLellan stayed in Saskatoon and had about eighteen staff – mostly lawyers, chartered accountants and MBAs. These local employees would often travel to visit companies or work on deals.
With very few operations in Saskatoon, Agra was virtually invisible to the local business community. McLellan and his team were comfortable out of the spotlight. Besides, they were too busy making deals and building a successful corporate empire to spend time seeking the limelight.
McLellan reflects on a deal with Peter Pocklington, the real estate developer from Edmonton. “We did a deal worth just over $30 million. Agra owned the Gainers meat plant, located on eleven acres of land in Edmonton. Peter didn’t want the meat, he wanted the land. In the end we made a deal.” McLellan explains that Agra traded Gainers for a collection of properties, including a 542-unit apartment complex under construction in Calgary. “We were on site for the rest of the construction period to make sure we got what we bought. I had a lien on Gainers and he could not do anything with the business until I was completely satisfied.”
One opportunity eventually led to another. Pocklington’s top two staff joined Agra shortly after construction of the apartment complex. They worked with McLellan on a $70 million resort in Grand Cayman. Agra hired Jack Nicklaus to design and build the golf course and contracted Hyatt Regency to operate the hotel, which was a cluster of several low-rise buildings. “It was a beautiful place,” McLellan remembers, “but years later it got wiped out by a hurricane.”
McLellan takes pride that key people never left his team. “I had the ability to get people to work hard for me, probably because they saw me work hard. They said I was tough but fair.”
McLellan was trusted by those with whom he did business. “I was good with bankers because I was honest. The bankers would say to me, ‘You’re in trouble, Tom.’ And I’d say, ‘Yes we are and here’s what we’re going to do about it.’ I told my staff, ‘Don’t you ever tell a lie to a banker no matter how bad the situation is because they’ll sense it and then pull the plug.’”
With responsibility for so many diverse companies, McLellan had a hands-off management style. He and Torchinsky would meet quarterly with each business. “Everyone ran their own companies and submitted a budget once a year. To exceed the budget they called me or the boss. There was usually a good reason. One day I got a call from our foreman in Yemen saying they tipped a drilling rig and needed a million dollars to buy another. They didn’t get it.”
When asked about his biggest mistake, McLellan quickly turns back to the radio business. In the early 1980s, Agra set up twelve all-news radio stations across Canada. After losing $10 million early on, McLellan wanted to shut it down. McLellan explains, “I had the pink slips and airline tickets. We were going to Toronto the next day to announce the closure.” Torchinsky called that night and said he wanted to give it more time to mature. Several years later they had lost a total of $50 million. “I should have pushed back harder,” McLellan explains.
Eventually, the job took its toll. McLellan travelled 49 of 52 weeks in his busiest year. Some of those weeks only involved a day trip, while in others he would be away from Sunday to Friday. “I had 1,700,000 frequent flyer miles. And that was when you got miles for flying, not for using a credit card. A lot of those weeks I worked 75 hours.”
In 1988, McLellan resigned at age 53. “I left because I was working myself to death. Also, Torchinsky had said to me there was so much to do and so little time to do it in. I’d had enough of the grind.”
Looking back, McLellan speaks favourably of his experience. “I liked working. I liked the people and the excitement of doing the deals. I liked how I was not doing the same thing every day. I got to know all kinds of industries and got to know all types of successful and interesting people.”
After McLellan left, Agra sold off its operating companies except for engineering and construction. It acquired a competing engineering business and grew significantly. The business was acquired in 2000 for $514 million by AMEC plc of Britain, a multinational engineering firm.
As for McLellan, he and a partner formed an investment banking company with offices in Saskatoon, Regina, Calgary, and Vancouver. He was also on several boards. He retired at age 65.
Torchinsky’s entrepreneurial drive and vision fuelled the company’s growth. But McLellan’s management skill and business acumen served as the glue that held the organization together. He was integral to vetting opportunities, closing deals, financing transactions, and ensuring strong performance. Agra’s results speak for themselves.
McLellan does not seek attention, so few people know about his career. The same goes for his financial contributions to the community – McLellan is adamant that successful people should give back. Although it was not his largest donation to a Saskatoon charity, McLellan recently contributed to Sherbrooke Community Centre in honour of his grandmother, who lost three of four sons who served in World War Two. It’s one of the many ways McLellan has quietly influenced this city he calls home.
First published in the March 2018 edition of The Business Advisor.