Healthy Holstien dairy cows feed at a farm in central Washington, in this December, 24, 2003 file photo.JEFF GREEN/REUTERS
U.S. agribusiness giant Cargill will buy animal feeds producer Provimi from private equity firm Permira for €1.5-billion ($2.1-billion), the companies said Monday.
The acquisition by one of the world's largest privately owned corporations will solidify Cargill's dominant position in the animal nutrition business.
Minneapolis-based Cargill last week reported annual earnings for the year ended in May of $2.69-billion, a 35 per cent jump from the year before, on sales of $119.5-billion, up 18 per cent. It spent $3-billion on acquisitions and expansions last year, including animal feed mills in Russia and Vietnam.
Animal nutrition is a bulwark of agriculture services, one of Cargill's five main lines of business. Among its biggest acquisitions in recent years was Agribrands, a spin-off of Ralston Purina, in 2001. Cargill had acquired feed producer Provimi Kliba in 2002.
"Cargill provided a clear and compelling case to become our owner and we believe that a combination of its animal nutrition business with Provimi will create a stronger business," said Provimi chairman and chief executive officer Ton van der Laan in a statement.
The deal will see Permira earn about 2.3 times its initial equity investment, a person familiar with the situation said, allowing the firm to return cash to its investors before it starts a fundraising drive in September.
Permira acquired Netherlands-based Provimi in 2007 in a deal valuing the business at €1.5-billion. It then reshaped Provimi, disposing of non-core assets including its fish feed and pet foods divisions, and made strategic acquisitions, including Mexican firm NASSA.
The company posted earnings before interest, tax, depreciation and amortization of €86-million in the first half of this year, a rise of 20.3 per cent.
Provimi had attracted interest from rival corporate bidders, including a team of Nutreco and DSM and China's New Hope Group.
Nutreco spokesman Jurgen Pullens said the company was still looking to expand in premix and fish feed and Nutreco had €500-million to €600-million available for M&A deals.
"Provimi was for sale, so it was an interesting opportunity, and we will continue our strategy. This was a good opportunity but there are more," he said, adding that Nutreco had doubled its operating profit between 2006 and 2011 with medium-sized deals.
DSM, which had considered a joint bid for Provimi with its smaller rival Nutreco, was not immediately available for comment.
"This statement from Provimi is a strong indication of DSM and Nutreco stepping out of the bidding process and we therefore believe it is unlikely either of these companies will buy Provimi, which we view as a positive," said ING analyst Fabian Smeets.
"DSM's share price has seen a significant decline on the back of the company potentially bidding for Provimi," he said.