A food products giant, ConAgra Foods Inc. (CAG - Free Report) , is collaborating with CHS Inc. and privately owned Cargill Inc. to set up a new joint venture called Ardent Mills. The new entity will offer services to customers in the baking and food industry. Subject to regulatory approvals, Ardent Mills is expected to start operations later in the calendar year 2013.
The new company will comprise the operations of ConAgra’s North American flour milling businesses and Horizon Milling, a Cargill-CHS joint venture formed in 2002. Ardent Mills will operate independently, while both ConAgra and Cargill will have a 44% ownership, whereas the rest 12% will be owned by CHS. Also, each company will have its representatives in the board of directors.
Ardent Mills will operate through 44 flour mills, three bakery mix facilities and a specialty bakery, all located in the U.S., Canada and Puerto Rico.
ConAgra Mills contributed around $1.8 billion to the total revenue for ConAgra in fiscal 2012. Horizon Mills generated revenue of roughly $2.5 billion in fiscal 2012. Once the operations begin at Ardent, an initial revenue generation of $800.0 million to $1.0 billion is estimated. The operations of Ardent Mills will start through the transfer of assets on a cash and debt free basis from the parent companies.
The deal is seen as a strategic move to serve the baking and food industries by creating new flour and grain products, services and solutions. It is expected that the mill will offer exceptional services like supply chain management, commodity price risk management and new product development, using the expertise and market knowledge of the founder companies.
ConAgra currently holds a Zacks Rank #1 (Strong Buy). Other stocks worth a look in the food industry are Chiquita Brands International Inc. and Flowers Foods Inc. (FLO - Free Report) ; both holding a Zacks Rank #1 (Strong Buy).