Origin to pay £25m for British fertiliser-maker Carrs Milling
Published 21/06/2011 | 05:00
AGRI-business Origin Enterprises has continued its strategy of bolt-on acquisitions with the purchase of a British fertiliser firm.
Origin, which is 71pc owned by the Swiss bakery giant Aryzta, will pay up to £24.9m (€28.2m) for the fertiliser and crop nutrients business of Carrs Milling (CM) Industries in Scotland and the north of England.
In a statement, Origin described CM as a "leading provider of branded specialist fertilisers together with integrated nutrient management systems servicing the arable, grassland, horticulture and forestry sectors".
"The company markets an extensive range of technically based nutrition applications that strongly support Origin's existing position in the UK," the statement added.
Under the terms of the deal, which is subject to shareholder approval, Origin will pay an equity consideration of £19m plus working capital-related debt of some £5.9m. The deal should close in July.
Origin chief executive Tom O'Mahony was delighted with the deal, describing Carrs as a "highly focused business".
"This acquisition builds upon Origin's commitment to create customised value propositions that meet farmers' needs through new service applications providing for the maintenance of soil fertility and the sustainable improvement to plant nutrition along with an enhanced procurement capability facilitating strategic opportunity to reduce the impact of input price volatility."
Origin said it was funding the deal through existing banking facilities and it was expected to be earnings-enhancing as soon it was completed.
Liam Igoe at Goodbody Stockbrokers estimated CM would add around €2m in profit before tax.
CM Fertiliser recorded earnings before interest and tax (EBIT) of £1.9m on the back of turnover of £59.3m for the year ended August 28, 2010.
The deal is Origin's third purchase in Britain this year and takes its spending over £64m, having already taken over the landscaping group Rigby Taylor and crop adviser United Agri Products.
Davy Stockbrokers' John O'Reilly broadly welcomed the deal, but warned that Carrs had historically shown "erratic" performances.
"With Carrs Milling, Origin has broadened its geographic reach and has diversified to the grassland sector.
"Anyone familiar with Carrs will know that its fertiliser activity has been an erratic performer in recent years with wild swings from loss to profit in what has been a volatile market.
"Origin is a much more disciplined operation. That it believes its model can achieve maintainable EBIT at CM of £3m and will be earnings-enhancing is credible.
"It is also very likely that there will be [purchasing and sales] synergies," he added.
Liam Igoe said the deal would complement Origin's own business in the sector.
"The Carrs fertiliser business copperfastens Origin's position as market leader in the UK blended fertiliser market and will give it a 23pc share of the total UK fertiliser market.
"Its volumes, at 270,000 tonnes, are just over half of Origin's existing fertiliser volumes outside of its Masstock business.
"Most of Carrs' business is to wholesalers, as is Origin's existing fertiliser operations [ex-Masstock], though about 30pc is into agri-retail."
Origin closed flat at €3.75.