Tuesday, Associated British Foods Plc (ABF.L) said it agreed with agricultural processor Archer Daniels Midland Co. to create Stratas Foods, a joint venture to manufacture, market and distribute packaged oil products in US and Canada, with immediate effect. The headquarters of the joint venture will be at Memphis, Tennessee.
Associated British Foods, or ABF, and Archer Daniels Midland, or ADM, will each possess a 50% stake in the joint venture. In exchange for each of their 50% shareholdings, Associated British Foods noted that it would contribute $38 million of assets from its oils business, primarily in the form of trademarks. Meanwhile, Archer Daniels will contribute packaging equipment at four of its facilities in US.
The business contributed by ACH Food Companies, a wholly owned subsidiary of Associated British Foods, generated operating profit of $20 million for the year ended September 15, 2007.
The remaining ACH business will be focused on its retail consumer brands, which include Mazola corn oil, Argo corn starch, Karo corn syrup, Fleischmann's yeast and its spice brands in North America.
According to Associated British Foods, Stratas Foods will serve the foodservice, speciality food ingredient and retail private label bottled oil markets. It is anticipated to produce 2.5 billion lbs of oil in its first full year of operation, with revenue of some $1.4 billion.
George Weston, chief executive of Associated British Foods, commented, "The transaction is a substantial step forward in the development of our US oils business. The new joint venture with ADM will strengthen our US packaged oils business and will significantly enhance its long-term growth prospects. ACH will focus on the growth of its retail consumer brands. We look forward to working with ADM to ensure this joint venture realises its full potential."
ABF.L is currently trading at 629 pence, up 4 pence or 0.64%, on a volume of 101 thousand shares.
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