Alltech set to be mega feed firm

The path of Canadian livestock feed company Masterfeeds is a long and winding one, and last week it appears to have merged into a super highway.

Alltech, an American animal feed nutrition company that does business in 128 countries, announced a share purchase agreement with Masterfeeds Nov. 10.

Financial terms of the deal were not disclosed, but it is expected to be completed by year end, subject to regulatory approvals. The agreement will make Alltech one of Canada’s largest livestock feed companies.

Masterfeeds was owned by a joint venture of Ridley Inc. and Ag Processing Inc. (AGP.) Alltech bought Ridley earlier this year, so the deal announced last week completes its acquisition of the firm.

Masterfeeds is based in London, Ont., and has 18 feed manufacturing and pre-mix facilities in Canada that employ 500 people.

Chief executive officer Rob Flack will remain in that role.

“I am excited about this in the sense that we really have access to world renowned research and product development, better than we’ve ever had in our 86 year history,” Flack said.

“We will be continuing to invest in our business, whether it’s plant technology, improving our plants, training our employees, bringing new products to the marketplace.… That’s not going to change with Alltech. In fact, I think we’ll get an even more robust support.”

Flack said Masterfeeds will provide Alltech with a stronger Canadian presence. The Kentucky company also owns EMF Nutrition, another Canadian company, which it bought in 2013.

As well, it will provide Masterfeeds with global access for marketing its animal nutrition products.

Flack said the future of Masterfeeds’ Canadian facilities remains to be determined once the deal is done, but most of them will continue to operate.

Response to the deal by Masterfeeds’ customers has been largely positive, he added.

That does not surprise Graham Cooper, executive director of the Animal Nutrition Association of Canada.

““It’s an acquisition or a combination of two significant companies, both in different businesses,” he said.

“Alltech is primarily a feed ingredient company and Masterfeeds is a complete feed manufacturer. So, for example, Masterfeeds would, when it’s manufacturing its feeds and it’s formulating its feeds, would perhaps buy some of the ingredients that Alltech manufactures.”

Alltech and Masterfeeds are ANAC members.

Cooper said there is a trend to-ward purchases, mergers and consolidation in the feed industry, and there is likely scope for more of the same.

“I think in this case … it’s slightly different, perhaps, from the norm in that you’ve got two companies that are in separate businesses, so there may be some really good synergies there that obviously they’ve seen.”

The combined company estimates annual revenues of $2.1 billion, according to a news release about the deal.

Masterfeeds is Alltech’s 14th acquisition since 2011.

It operates feed plants, pre-mix operations and three retail stores in Alberta, Saskatchewan, Manitoba, Ontario and Quebec. It markets directly to farmers and also through a dealer network.

“Over the last 22 years, Masterfeeds has tripled in size,” the news release said.

“Through strategic acquisitions and most recently merging with Ridley Canada (Feed-Rite), Masterfeeds has become a leading feed manufacturer in Canada.”

Its facilities will bring Alltech’s holdings to 25 feed manufacturing and pre-mix plants, nine retail stores and seven distribution centres.

Mark Peters, sales and marketing director for Canadian Bio-Systems in Calgary, said he views the Alltech-Masterfeeds deal as good for the industry.

Masterfeeds is a customer of CBS, which manufactures and supplies products used in feed, food and environmental applications.

“It opens up fresh opportunities,” said Peters.

“A lot of times, you have new companies springing out of this type of merger or acquisition. It brings a bit of freshness to it.”

Flack said he doesn’t worry about the optics of an American company acquiring Canadian operations.

“We’ve had American ownership of Masterfeeds since 1989,” he said.

“This is really more of a complementary add-on to the vision and the strategies of Alltech and its founder, Dr. Pearse Lyons.”

Lyons founded the privately held company in 1980. It now has more than 4,200 employees.

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