Under the proposed deal, set to complete by the end of 2013 subject to regulatory approvals, ConAgra and Cargill will each have a 44% stake in Ardent Mills, while producer-owned cooperative CHS will own the remaining 12%.
All three will have representatives on the board, while CHS will be among the new company’s wheat suppliers.
Ardent Mills - which will operate as an independent joint venture of ConAgra, Cargill and CHS - will be led by Horizon Milling President Dan Dye, while the location of the headquarters will be determined later.
Dye will be joined by Bill Stoufer, current president of ConAgra Mills, as Ardent Mills’ chief operating officer and chief integration officer.
The big challenge is finding spaces in the bakery industry that are still growing
But what will the deal mean for customers and suppliers? And how will combing the two businesses create added value?
Speaking to FoodNavigator-USA after the deal was announced this morning, Scott Portnoy, corporate vice president, Cargill, said that combining the two businesses was “not about being the biggest, but being the best”.
Ancient grains, gluten-free, whole grains, products with a better nutritional profile
While both had strong R&D capabilities, bringing the two together would “bring some hybrid vigor” to the party and help customers find growth opportunities in a bakery market that was suffering in many areas, he acknowledged.
“We see opportunities in ancient grains, gluten-free, whole grains, products with a better nutritional profile and want to help customers find those spaces that are still growing in markets that are slightly deteriorating overall."
Horizon Milling would contribute significant expertise and tools in risk management, enabling customers across the combined business to better manage pricing volatility; while ConAgra Mills brought strong consumer insight capabilities to the party, he said.
“Being part of a broad business [ConAgra Foods] that includes a lot of consumer products has helped them get close to the final consumer.”
Asked whether there would be cost synergies from plant rationalization, he said that this was unlikely.
“There is not significant redundancy in the milling operations and we believe both asset footprints will be completely necessary.”
However, there would be cost savings on the procurement front, he predicted: “Together we should be able to do a better job of optimizing this and creating a more efficient supply chain.”
Asked why the company had not yet decided where the HQ of the new business would be, he said: “We want to be very respectful of the process we’re using to determine how the marketplace can best be served by the new business, so we haven’t come to a decision yet.”
ConAgra Foods CEO Gary Rodkin 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.”
Two flour milling giants
ConAgra Mills - which generated sales of $1.8bn in the year to May 27, 2012 - operates 23 flour mills in the US and employs around 1,000 staff.
Horizon Milling - which generated sales of $2.5bn in the year to May 31, 2012 - operates 21 flour mills, three bakery mix facilities and a specialty bakery, in the US and Canada, and employs around 1,400 staff.