ForFarmers and 2Agriculture to form UK feed joint venture

11th July 2022 | Animal Feed, Company News, Poultry

ForFarmers UK and 2Agriculture have agreed to merge their domestic feed operations into a joint venture company, subject to approval from the UK competition authorities. The move helps ForFarmers access the integrated poultrymeat sector while allowing 2Agriculture to benefit from ForFarmers’ wider feed milling strength.

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The prospective partners envisage a combined business producing some 3 million tonnes of multispecies compound feeds annually for sale to a wider customer base. “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,” they state.

The non-cash merger agreement would see the JV shareholding split 50.1% for ForFarmers UK and 49.9% for 2Agriculture, based on the current enterprise value of both partners and their respective expectations for 2022 and beyond. The division also reflects the fact that 2Agriculture is fully focused on the poultry sector and has existing supply arrangements in the integrated poultry market.

ForFarmers UK managing director Steven Read is the nominated managing director for the joint venture, which is expected to rebrand under ForFarmers colours. 2Agriculture managing director Kevin Sketcher is a nominated board member. ForFarmers will consolidate 2Agriculture fully into its financial results.

The partners point to potential growth in the UK monogastric sectors compared to the ruminant markets – the UK is 95% self-sufficient in poultrymeat and 60% in pigmeat products. “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,” they state.

Therefore, expectations for the poultry sector growth are most positive. With the majority of UK poultry feed made in-house by integrated poultry processors, the JV helps ForFarmers access this market.

The Dutch co-operative ForFarmers entered the UK market in 2012 through its acquisition of the BOCM Pauls business. The Group has been keen to grow its poultry feed volume – it acquired the Polish poultry feed business Tasomix in 2018 as part of this aim. The UK business makes some two million tonnes of compound feeds each year across its network of 14 feed mills, excluding its Total Feed volume of straight and co-product feed materials. But the majority of its domestic feed production is for the ruminant and pig sectors, with smaller volumes of poultry products.

The 2Agriculture business was first established as the Grampian Country Food Group in the 1970s, growing to become a major UK red meat pig and poultry processor. It was sold to Dutch co-operative Vion in 2008, before financial difficulties saw the sale of the redmeat and poultry assets to the 2Sisters Food Group (2SFG) of poultry processing companies within Boparan Holdings in 2013, with the Karro management buy-out acquiring the pigmeat interests.

The 2Agriculture feed business is independent of the 2SFG as it is owned by another Boparan vehicle, Amber REI Holdings although it is one of the suppliers of poultry feed for 2SFG chicken farms. Amber REI Holdings will own the 49.9% share of the JV.

2Agriculture supplies around 1.2m tonnes of poultry feed annually – mostly into the integrated poultry market, but also to independent customers. It operates five feed mills – the headquarters plant at Ingliston in Scotland which was moved and rebuilt in 2017; Stoke Ferry and Bawsey near King’s Lynn in Norfolk; Billinghay in Lincolnshire; and Wrexham in North Wales. There is also an extrusion plant near Ely in Cambridgeshire.

The two companies say the joint venture will meet both of their strategic objectives. ForFarmers UK strengthens its position in the “promising” UK poultry sector while also creating possibilities for efficiency savings – particularly in raw materials sourcing, production and logistics. 2Agriculture would benefit from shared investment opportunities across a larger production volume, an increased geographic spread of manufacturing sites and exposure to other species markets.

The move would combine 2Agriculture’s poultry expertise with ForFarmers’ R&D and formulation capability, particularly for ruminant and pig feeds. Finally, the joint venture will invest in expansion of the supply chain, enabling improved transparency around sustainability and the origin and quality of food.

“We are excited to announce the merger with 2Agriculture, which will bring benefits to customers and supply chains in all sectors,” says Mr Read. “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.”

For 2Agriculture, Mr Sketcher adds: “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,” Mr Sketcher concludes.