The deal is subject to approval from the UK competition authority.
The JV will bring together 2Agriculture’s expertise in the promising poultry feed sector with ForFarmers’ capabilities in R&D as well as in formulation, particularly in ruminant and pig feeds, said the companies.
The merged entities will have a balanced feed portfolio across species, with an expected combined sales volume of more than three million tons of compound feed per year.
ForFarmers UK said the move will allow it to strengthen its position in the UK’s promising poultry sector and at the same time creates possibilities to make the organization more efficient. 2Agriculture indicated it would benefit from shared investment opportunities across a larger volume, an increased geographic spread of manufacturing sites and exposure to other species markets.
Caroline Vogelzang, director, investor relations, ForFarmers, told us that the combined broad geographic coverage will provide synergy and efficiency opportunities, in all aspects of the business. "The intended JV will also generate upside due to being able to combine the expertise and scale benefits from sourcing of raw material; it will also allow continued investment of the supply chain, enabling improved transparency around sustainability and the origin and quality of food."
Likely impact on staffing levels
Asked whether combining the entities would result in job losses and mill closures, she said: “As a result of two organizations merging into one, duplication of some positions will occur and consequently may have an impact of employees of both companies. It is, however, too early to be specific. First, the UK’s Competition and Markets Authority (CMA) needs to approve the intended JV. All steps will be done with care and caution and in full consultation with our staff.”
She said there wasn’t any specific trigger for the merger, but that the move fits well with the strategic objectives of both parties.
The plan is to over time brand the new JV under the name ForFarmers, added Vogelzang.
Production volumes
ForFarmers UK, a subsidiary of the Netherlands-based ForFarmers NV, sells around two million tons of compound feed volumes annually, with production across 14 mills. The majority of feed produced by ForFarmers is for ruminants and pigs, with smaller volumes being produced for poultry. The company has 900 employees.
2Agriculture supplies about 1.2m tons of feed annually to poultry farmers mostly into the integrated market, but also to independent customers. The company employs 250 employees and operates five mills located in Scotland, East Anglia and North Wales and has an extrusion plant in Cambridgeshire.
The total feed market in the UK is estimated at approximately 17.5m tons.
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, which is based on the current enterprise value of both companies 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, they added.
On completion of the deal, ForFarmers will consolidate 2Agriculture fully into its financial results.