--ConAgra, Cargill and CHS to combine their North American
flour-milling businesses
--Deal is first major merger in milling industry in a decade
--Joint venture will be biggest flour-milling company in
U.S.
(Adds details, quotes from analysts and Cargill executive.)
By Owen Fletcher and Ben Fox Rubin
ConAgra Foods Inc. (CAG), Cargill Inc. and CHS Inc. (CHSCP) said
they will combine their North American flour-milling businesses
into a multibillion-dollar joint venture, marking the milling
industry's biggest merger in years.
The new company, called Ardent Mills, will combine ConAgra Mills
and Horizon Milling, a joint venture formed in 2002 between Cargill
and CHS. Ardent Mills will be the industry's biggest player,
selling flour products to customers in the baking and food
industries and offering such services as product development.
Cargill, a major grain processor and trader, and ConAgra, a food
company with such brands as Chef Boyardee and Hunt's, will each
have a 44% stake in Ardent Mills. CHS, a farmer's cooperative, will
control the remaining 12%.
Ardent Mills will control about about one-third of the U.S.
milling market by capacity, according to Joshua Sosland, editor at
Milling & Baking News, a weekly industry magazine.
"This is the first major merger in the milling industry in over
a decade," Mr. Sosland said. "You could make the case that it's
overdue."
The combination will mirror consolidation in recent years in the
baking industry, which has been led by Mexican giant Grupo Bimbo
SAB and Thomasville, Ga.-based Flowers Foods Inc. The joint venture
will put the millers in a better position both to serve and
negotiate with their bakery customers, said Jonathan Feeney, an
analyst with Janney Capital Markets.
The new company will have 44 flour mills, three bakery mix
facilities and a specialty bakery, spread throughout the U.S.,
Canada and Puerto Rico. The location of Ardent Mills's headquarters
hasn't been decided.
Combined annual sales of Ardent Mills will top $4 billion. Sales
for ConAgra Mills were about $1.8 billion in its last fiscal year,
while Horizon Milling's were about $2.5 billion.
Horizon Milling President Dan Dye will become chief executive of
the new company. Bill Stoufer, the current president of ConAgra
Mills, will become Ardent Mills's chief operating officer and chief
integration officer.
One benefit from the merger will be a bigger network of mill
locations for both companies. ConAgra Mills has mills in seven
states where Cargill lacks a presence, including Colorado, Illinois
and Florida.
"There are places where, individually, we were not as strong as
we will be with the more complete asset footprint that we now
have," Cargill Corporate Vice President Scott Portnoy said in an
interview.
The combined resources of the merged company will also allow for
greater innovation and price-risk management for customers facing
volatile commodity markets, Mr. Portnoy said.
Omaha, Neb.-based ConAgra Foods, Minneapolis-based Cargill and
St. Paul, Minn.-based CHS will contribute their milling operations
to the new company on a cash-free, debt-free basis in exchange for
ownership interests. The companies expect the deal to be completed
late this year.
The owners intend to receive cash distributions from Ardent
Mills at closing, with initial estimates of the total proceeds to
be $800 million to $1 billion.
The owners intend for Ardent Mills to be self-financed through
cash flow from operations and its own bank debt and credit
facility.
Write to Owen Fletcher and Ben Fox Rubin at
owen.fletcher@dowjones.com and ben.rubin@dowjones.com
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