ForFarmers UK and 2Agriculture Ltd have agreed to merge their businesses in the United Kingdom into a joint venture to serve a wider customer base. The joint venture is expected to have combined sales volume of more than 3 million tonnes of compound feed per year.
ForFarmers United Kingdom (ForFarmers UK) and 2Agriculture have come to an agreement to merge their businesses into a joint venture to serve a wider customer base. The joint venture will have a balanced feed portfolio across species, with an expected combined sales volume of more than 3 million tonnes of compound feed per year. At the same time the joint venture makes for a robust business, with improved expertise and presence across species, to successfully meet the changing demands from the entire value chain.
The mutual agreement to enter into a joint venture meets the strategic objectives of both partners. ForFarmers UK strengthens its position in its home country in the promising poultry sector and at the same time creates possibilities to make the organisation more efficient. 2Agriculture benefits from shared investment opportunities across a larger volume, an increased geographic spread of manufacturing sites and exposure to other species markets.
The deal will be subject to approval from the UK competition authority.
DEAL STRUCTURE
The merger agreement is a non-cash transaction. The share split will be 50.1% for ForFarmers UK and 49.9% for 2Agriculture. This is based on the current enterprise value of both joint venture partners, and takes into account the respective expectations for 2022 and beyond. The share split also reflects the fact that 2Agriculture is fully focused on the promising poultry sector and has existing supply arrangements in the integrated market. ForFarmers will consolidate 2Agriculture fully into its financial results.
Steven Read, Managing Director of ForFarmers UK and nominated Managing Director of the intended joint venture says: “We are excited to announce the merger with 2Agriculture, which will bring benefits to customers and supply chains in all sectors. Together, we can meet the changing requirements from customers and society through our strength in innovation and feed concepts. At the same time, we have the opportunity to create further value for our customers across all species by constantly driving improvements and optimising our service in the most efficient manner. We look forward to working with the colleagues at 2Agriculture to make this happen”.
Kevin Sketcher, Managing Director of 2Agriculture and nominated Board member of the intended joint venture says: “We look forward to joining forces with ForFarmers, a company that is also very focused on delivering quality feed and good advice to customers to enable them to realise sustainable and enhanced returns on farm. We see the anticipated joint venture as a good strategic step forward for both parties. We will be able to give our combined customer base across all species value for money by providing them with sustainable high quality feed. Moreover, we will be well positioned to support the agricultural sector offering food security to UK consumers. ”
PROFILES OF PARTNERS IN THE JOINT VENTURE
ForFarmers UK, a subsidiary of the Dutch-based ForFarmers N.V., is a feed company in the United Kingdom selling approximately 2 million tonnes of compound feed volumes annually (i.e. excluding volumes of straights and co-products) across species, produced in 14 mills. The majority of feed produced by ForFarmers is for ruminants and pigs, with smaller volumes being produced for poultry. The company has approximately 900 employees.
2Agriculture is a UK company that supplies approximately 1.2 million tonnes of feed annually to poultry farmers mostly into the integrated market, but also to independent customers. The company employs 250 employees and operates 5 mills located in Scotland, East Anglia and North Wales and has an extrusion plant in Cambridgeshire.
STRATEGIC RATIONALE
The joint venture will bring together 2Agriculture’s expertise in the promising poultry feed sector with ForFarmers’ capabilities in research and development as well as in formulation, particularly in ruminant and pig feeds. In addition, the combined broad geographic coverage will provide synergy opportunities, particularly in production and logistics. Similarly, the joint venture will generate further benefits for its customers by being able to combine the sourcing of raw materials. Finally, the joint venture will invest in expansion of the supply chain, enabling improved transparency around sustainability and the origin and quality of food.
MARKET CHARACTERISTICS
The total feed market in the United Kingdom is estimated at approximately 17.5 million tonnes. Expectations per species vary, with the expectations for the poultry sector at present being the most positive. The majority of poultry feed produced in the United Kingdom is manufactured in-house by poultry processors for integrated use in their supply chains. The United Kingdom is not fully self-sufficient with respect to production of fresh chicken (95%) nor of pig meat (60%). Although the pig market is expected to grow in the mid to longer term, the short-term outlook is that the market will remain stable due to the destabilised European pig market as a result of various outbreaks of African swine fever. The dairy market is self-sufficient and the ruminant sector in general is expected to grow minimally.
