Packaged foods company ConAgra Foods Inc. (CAG: Quote), farm and refining cooperative CHS Inc. (CHSCP: Quote) and Cargill said Tuesday that they have agreed to combine their North American flour milling businesses to form Ardent Mills, a new flour milling company that will serve customers in the baking and food industries.
Ardent Mills will combine the operations of ConAgra Mills and Horizon Milling, a Cargill-CHS joint venture formed in 2002. It will operate as an independent joint venture of its three parent companies, Omaha, Nebraska-based ConAgra Foods, Minneapolis, Minnesota-based Cargill, and St. Paul, Minnesota-based CHS.
The new company will take advantage of the combined assets, capabilities and experience of ConAgra Foods, Cargill and CHS to to bring innovative flour and grain products as well as services and solutions to the marketplace. The parent companies expect the formation of Ardent Mills to be completed in late calendar year 2013.
Dan Dye, who currently serves as president of Horizon Milling, will be appointed as Ardent Mills' chief executive officer once the new company is formed. Bill Stoufer, current president of ConAgra Mills, will become Ardent Mills' chief operating officer and chief integration officer.
Ardent Mills' operations and services will be supported by 44 flour mills, three bakery mix facilities and a specialty bakery, all located in the U.S., Canada and Puerto Rico. The parent companies noted that the location of Ardent Mills' headquarters will be determined at a later date.
ConAgra Foods and Cargill will each own a 44 percent stake in Ardent Mills, while CHS will own the remaining 12 percent stake. All thee companies will contribute their respective milling operations to Ardent Mills on a cash-free, debt-free basis in exchange for the agreed ownership interests and also have representatives on Ardent Mills' board of directors.
Sales for ConAgra Mills, currently a part of ConAgra Foods' Commercial Foods segment, were about $1.8 billion in its fiscal year ended May 27, 2012. Sales for Horizon Milling were about $2.5 billion in its fiscal year ended May 31, 2012.
Gary Rodkin, Chief Executive Officer of ConAgra Foods said, "Ardent Mills will set the new industry standard by addressing the most important issues facing customers, such as commodity price volatility, increasingly sophisticated food safety requirements, the need for more cost-effective supply chains and growing market demand for more innovation in products and processes."
The three parent companies noted that suppliers, including the many farmers and cooperatives that currently provide wheat to the milling operations of ConAgra Mills and Horizon Milling, are expected to benefit from the additional sourcing opportunities provided by Ardent Mills' asset base.
The companies expect to receive cash distributions from Ardent Mills at closing. Initial estimates of the total proceeds to be distributed range from $800 million to $1 billion.
In Tuesday's regular session, CAG is trading at $34.75, up $0.06 or 0.17 percent on a volume of 33,227 shares, while CHSCP is trading at $32.65, up $0.07 or 0.23 percent on a volume of 5,100 shares.
by RTT Staff Writer
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