United Malt Group, whose Canadian assets operate under the Canada Malting banner, last month locked in on a previously announced deal to sell itself to France’s Malteries Soufflet for A$1.5 billion (C$1.3 billion).

Sydney, Australia-based United Malt and Soufflet reported Aug. 7 they now have written confirmation from Canada’s Commissioner of Competition that the office “does not intend to make an application” to challenge the transaction.

Thus, United Malt said, the condition for Canadian regulatory approval “will be satisfied” if the commissioner’s notice isn’t reversed by Aug. 23.

United Malt reported separately Monday that it and Soufflet now also have confirmation from the United Kingdom’s Competition and Markets Authority (CMA) that the CMA has “no further questions in respect of the proposed transaction.”

Much like the “no-action letter” Canadian regulators provide in such cases, “no further questions” is the CMA’s standard response when the authority doesn’t intent to mount a public inquiry into the deal, United Malt said.

The world’s fourth largest commercial maltster, United Malt makes bulk malt for brewers, craft brewers, distillers and food companies and has 12 processing plants in Canada, the U.S., Australia and the U.K., with combined malting capacity of about 1.26 million tonnes. It had been owned by Australia’s GrainCorp since 2009 and was spun off in 2020.

United Malt’s Calgary-based Canada Malting unit, which alone produces about 400,000 tonnes of malt per year, includes malting plants at Calgary, Montreal and Thunder Bay, nine country elevators in the Prairie provinces, and Country Malt facilities at Delta, B.C., Brampton and Calgary.

Soufflet, which has 28 malt houses in Europe, Asia, Africa and Latin America with combined production capacity of 2.36 million tonnes per year, has been an arm of French agribusiness InVivo since last year. InVivo has previously said it plans to be the world’s top malt firm within five years. — Glacier FarmMedia Network

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The A$5 per share offer represents a 45.3 per cent premium to United Malt’s last close of A$3.44. Trading in shares of the company was halted on Monday.

InVivo, which acquired agribusiness peer Soufflet last year, has said it aims to become the world’s top malt producer within five years through external growth.

Earlier this year, it signed an agreement to take over Belgian malthouse Castle Malting, one of the oldest producers of the beer ingredient in the world.

Malteries Soufflet is the largest commercial maltster in Europe and the second largest globally.

United Malt disclosed it first received an offer of A$4.15 per share in December, followed by several others from the French firm. The latest proposal was made on March 14.

The company has granted Soufflet exclusive access to conduct a due diligence.

United Malt is the world’s fourth largest commercial maltster, producing bulk malt for brewers, craft brewers, distillers and food companies. The company has processing plants in Canada, the U.S., Australia and the United Kingdom.

United Malt’s Canadian assets are under the purview of Calgary-based Canada Malting, which produces about 400,000 tonnes of malt per year.

Canada Malting’s business includes malting plants at Calgary, Montreal and Thunder Bay, nine country elevators across the three Prairie provinces, and Country Malt facilities at Delta, B.C., Brampton and Calgary. The Country Malt packaging plant in Calgary was set up at the Canada Malting plant site in 2019.

United Malt was acquired by Australia’s GrainCorp in 2009 and spun off in 2020. GrainCorp retains an 8.5 per cent stake in the firm, while investment firm Tanarra Capital is United Malt’s largest shareholder.

Neither of the companies immediately responded to Reuters requests for comment on the offer.

— Reporting for Reuters by Harish Sridharan in Bangalore.

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The potential consolidation comes as France, the European Union’s largest agricultural producer, is trying to embrace environmentally conscious farming practices while vying with cheaper grain suppliers such as Russia.

A tie-up could also let InVivo, a grouping of 192 farmer-owned co-operatives, and century-old Soufflet better compete with rivals such as U.S. group Cargill and Germany’s BayWa.

“The combination of InVivo Group and Soufflet Group would lead to the creation of a French champion in agriculture and agribusiness with an international footprint,” they said in a statement.

A deal would bring together their international grain trading activities while also associating complementary businesses with limited overlap, including Soufflet’s flour milling and malt production and InVivo’s wine distribution and garden retail, they said.

The transaction price was not disclosed.

The deal, under which the Soufflet brand would be preserved, could close by the end of 2021, they said.

‘Positive for France’

The talks were welcomed by French Economy Minister Bruno Le Maire, who said in a statement sent to Reuters that “the creation of this group would be positive for France and French agriculture.”

That contrasted with Le Maire’s initial opposition to a takeover approach for French retailer Carrefour SA by Canadian convenience-store operator Alimentation Couche-Tard, with the minister citing food sovereignty concerns.

InVivo said it expected to finance the acquisition through its own funds, bank loans and potentially by selling stakes in some activities to partners.

InVivo has in recent years sold its animal nutrition division Neovia to U.S. agribusiness group Archer Daniels Midland, while expanding its garden retail business and entering wine merchandising.

It restructured its grain trading unit after losses, and developed a wheat and barley trading joint venture, Grains Overseas, with two other co-operative groups.

Soufflet has been the subject of takeover rumours in the past, partly because of the lack of a family successor to take over from Michel Soufflet, board chairman, and his son Jean-Michel, who is chief executive.

InVivo would maintain Soufflet as a separate entity within the group and no asset sales were planned, InVivo said.

Current Soufflet management would stay for a transition period expected to last a few years, it added.

— Reporting for Reuters by Sybille de La Hamaide and Gus Trompiz in Paris; additional reporting by Gwenaelle Barzic.

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Neovia is majority owned by French cooperative group InVivo. Investment group Eurazeo also has a 17 per cent stake.

The acquisition, first reported by Reuters, would make ADM a major player in the global animal feed industry, which the company says has sales of more than US$700 billion.

ADM and rival grain merchants such as Bunge and Cargill have struggled in recent years as a global oversupply of food commodities has made it tough to turn a profit on their core business: buying, processing, and selling corn, soy and wheat.

The companies have been diversifying into higher-margin sectors, such as food ingredients and aquaculture feed, to compensate for the poor returns.

“We were happy with our animal feed activities but it was too local,” Pierre-Christophe Duprat, ADM’s president for Europe, Middle East and Africa, told Reuters. “If we wanted to expand we needed a more global approach.”

The acquisition would be ADM’s second largest to date after it purchased natural food ingredients company Wild Flavors for US$3 billion in 2014. Talks about a separate takeover of Bunge stalled this year, according to sources and media reports.

Neovia, which had sales of 1.7 billion euros (C$2.6 billion) in 2017, produces and sells a range of products related to pet care, aquaculture, livestock feed and other areas.

“If you’re management and your goal is to move away from the grain merchandising operations and the volatility that comes with that, this is the way to do it at a fair price,” said Seth Goldstein, equity analyst for Morningstar in Chicago.

Neovia has a limited presence in North America but a large one in Europe, Southeast Asia, and Central and South America, with 75 per cent of its sales coming from outside Western Europe.

This complements ADM’s animal nutrition business, which is primarily in the U.S. and has growing exposure in China, according to Fitch Ratings.

ADM is the most U.S.-focused of the major grain companies and has been trying to expand its geographic footprint.

The transaction can “serve as a platform for additional potential bolt-on acquisitions to expand the firm’s geographical reach,” Fitch Ratings said.

New unit

ADM would divert its feed activities into Neovia’s to create a new unit, called ADM-Neovia, with combined sales approaching US$3.5 billion, Duprat said. The takeover would lead to a reorganization and a likely reduction in staff in France, he said.

ADM said the deal would offer run-rate earnings before interest, taxes, depreciation and amortization (EBITDA) synergies of about 50 million euros by the fourth full year after the transaction closes.

The target seems “adequately conservative,” JP Morgan analyst Ann Duignan said.

The deal would be 100 per cent cash and is expected to be finalized in the fourth quarter of the year after a consultation process involving employee representatives and pending supervisory authority approval.

InVivo, France’s largest cooperative group, would use one billion euros expected from the sale to step up investment in new farming techniques and support acquisitions in wine, CEO Thierry Blandinieres said in an interview.

In another sign ADM is seeking to diversify its portfolio, the company said on Friday it would pay 185 million pounds (C$320.6 million) to buy Probiotics International Limited, better known under its umbrella brand Protexin, a Britain-based maker of probiotic supplements for people and animals.

— Reporting for Reuters by Sybille de La Hamaide and Tom Polansek; additional reporting by Gus Trompiz in Paris.

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InVivo, a grouping of 220 agricultural co-operatives and one of the largest exporters of French cereals, has focused on overseas growth under a reorganization launched two years ago by CEO Thierry Blandinieres.

In grain trading, Quebec’s La Coop Federee and Australia’s CBH Group have joined a co-operative alliance previously created by InVivo with Aca in Argentina and Zen-noh in Japan, Blandinieres said during a press presentation.

The network is focused on knowledge sharing to allow the cooperatives to have similar market expertise to multinational traders, but the partners are now also discussing the possibility of jointly negotiating freight terms, he said.

The co-operative alliance, as well as a separate partnership with Archer Daniels Midland covering the Black Sea region, was also helping InVivo to source grain overseas, which was crucial this season after a poor French harvest, he added.

In France, InVivo distributes about 40 per cent of crop inputs such as pesticides and fertilizers sold in the European Union’s biggest grain producer, but wants to reinforce its position as the world’s leading crop chemical makers consolidate through multi-billion merger deals.

The French group aims to expand joint procurement of crop chemicals through Novafield, a European alliance of cooperatives, and develop its own offer via Life Scientific, a joint venture in Ireland based on molecules that are no longer patented.

InVivo already buys about 10 per cent of its crop inputs through Novafield and this has supported a 30 million-euro (C$43.77 million) gain for its farm supplies division over the past five years, Blandinieres said.

The group said its total sales reached 6.4 billion euros in its 2015-16 year to June 30, up from 5.7 billion the previous year.

— Reporting for Reuters by Gus Trompiz in Paris.

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InVivo entered the wine sector this year through the acquisition of Bordeaux wine merchant Cordier Mestrezat and an alliance with France’s largest wine co-operative, Vinadeis, in the latest stage of a group overhaul under CEO Thierry Blandinieres.

The priority for the newly created InVivo Wine division, which aims to generate 500 million euros (C$751 million) in annual sales within five years, is to break into the lucrative U.S. sector via an acquisition “as soon as possible”, Blandinieres told reporters.

“Our mission is to go and reconquer the U.S. market,” he said. “The French have let the United States go.”

InVivo aims to use Cordier as a brand in the U.S., where consumers are guided by grape varieties rather than individual chateaux, and where the average bottle price is around US$7 compared to two to three euros (C$3-$4.50) in French supermarkets, Blandinieres said.

He declined to cite potential U.S. targets but said he would like to have a presence in California.

In France, InVivo sees scope to develop 200 food stores within five years under the “Frais d’Ici” banner it is testing at two outlets, Blandinieres said.

The fresh-food concept, based around local products supplied by farming co-operatives, would be expanded using space next to some of InVivo’s Gamm Vert garden retail stores, and could generate one billion euros in annual sales, assuming five million in sales per outlet, he said.

InVivo, made up of more than 200 farmer-owned cooperatives, reported a sharp rise in profits for its 2014-15 financial year that ended on June 30, with earnings before interest, tax, depreciation and amortisation (EBITDA) reaching 106.7 million euros against 64 million the previous year.

The group’s animal health and nutrition division, which has made a series of overseas acquisitions, contributed about half of the earnings rise, while the grain trading business returned to a gross profit after a loss of 15 million euros the prior year, InVivo said.

Group sales were stable at 5.7 billion euros.

In grain trading, InVivo continues to pursue overseas alliances and announced agreements with fellow cooperative groups Aca in Argentina and Zen-noh in Japan with a view to sharing expertise and developing trading opportunities.

The group, which targets a further increase of 20 million euros in EBITDA in 2015-16, reiterated it will consider bringing in minority shareholders for other divisions after opening up the capital of its animal health unit.

— Reporting for Reuters by Gus Trompiz in Paris.

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