Cargill Beefs Up Animal Nutrition

Agribusiness giant Cargill will buy the Dutch animal nutrition firm Provimi for $2.1 billion. On Aug. 15, Cargill made the binding offer to Provimi’s owner, the private equity company Permira.

Provimi sells nutritional additives for farm animal feeds. The company had $2.3 billion in 2010 sales and employs 7,000 people in 23 countries in Asia, Europe, Africa, and Latin America. Minneapolis-based Cargill, also privately held, reported sales of $119.5 billion. Cargill buys and processes grain, and it has an animal nutrition and feed business that includes feed ingredients.

In late June, media speculation that Provimi was for sale prompted Dutch chemical firm DSM to confirm that it had joined with another Netherlands-based company, animal nutrition firm Nutreco, to try to acquire Provimi. DSM sells carotenoids, feed enzymes, and vitamins to the animal feed market. It has estimated that the nutritional additives segment is worth just under $11 billion annually, with a growth rate of 2–4%.

Cargill, for its part, has been expanding its animal feed presence in Europe. In July, it acquired Italian animal nutrition company Raggio di Sole Mangimi. According to Sam Hamadeh, CEO of PrivCo Media, which analyzes financial information about private firms, Cargill has quietly spent an estimated $6.5 billion in the past 12 months acquiring firms to diversify its business. The purchases include six branded food companies in Brazil, Central America, and India. The cash came from Cargill’s $11.5 billion sale of its shares in fertilizer firm Mosaic.

Cargill’s strengths in supply chain management, risk mitigation, and logistics will help Provimi’s subsidiaries around the world run their operations more efficiently, says John Mannhaupt, business analyst at animal health research firm Brakke Consulting. “But the reason both DSM and Cargill were interested in Provimi is that it has done a better job of downstream branding and creating value-added products,” Mannhaupt points out.

Cargill’s growing European base will help the U.S. firm reach agriculture customers in emerging markets such as China, India, and Russia, Mannhaupt adds.