Origin Enterprises, parent to the UK’s Agrii agronomy business, has increased the footprint of its Agri-Services activity in Eastern Europe through the purchase of two businesses in Romania. At the same time, the company has raised €86 million through the disposal of the group’s flour milling and food manufacturing interests to help fund further Agri-Services investment.
Origin has acquired 100% interests in Redoxim, based in Timisoara in the far west of the Romania and Comfert with its headquarters in Bacau towards the eastern border. The Group is already active in two Eastern Europe countries - Poland through the Dalgety Polska operation and in the Ukraine as Agroscope bought in early 2014.
Redoxim was founded in 1991 and provides agronomy services and inputs to arable, vegetable and horticulture growers, making a 2014 operation profit of €5.6 million on sales of €53.6m. Its staff of 190 includes 50 agronomists and product specialists, and the business services 2,000 accounts through an established distribution network of 55 retail outlets. Origin has agreed to pay €35m - €31.5m on completion and €3.5m a year later.
Comfert dates back to 1998, and provides agronomy services, integrated inputs and crop marketing support to arable and vegetable growers. Its 2014 operating profit was €3.2m on revenues of €100.6m. Comfert employs 180 people, with 32 agronomists and product specialists and a comprehensive distribution network servicing to service some 1,900 mainly intensive and technically savvy farm customers. The deal is based on an enterprise value of €19.4m, plus deferred considerations based on annual profit targets over the next five years, and subject to approval from the Romanian Competition Council, should complete during October 2015.
Origin has also divested its 32% equity stake in the Irish consumer foods business Valeo Foods Group to UK investment fund CapVest Partners. Origin and CapVest created Valeo in 2010 to facilitate the merger of Origin’s wholly-owned consumer food interests including the Odlums flour mills, and the Irish food company Batchelors.
The Group has received €86.6m comprising €42.5m for the 32% shareholding and €44.1m in full settlement of the vendor loan note in place since Valeo was created. It intends to use the disposal to reduce debt initially and then for further investment in the Agri-Services operation.
The food businesses were one of the last legacies of the IAWS Group, which formed Origin Enterprises in 2007 to manage its agricultural interests and certain food assets, allowing IAWS to focus on its food service activities in Europe and North America. It subsequently merged with a Swiss food group to create Aryzta, retaining a majority shareholding in Origin which was only relinquished earlier this year (ATN April 10th).
Origin chief executive Tom O’Mahony says the Romanian acquisitions are being funded from existing bank facilities, and are expected to be earnings enhancing from the 2016 financial year that begins on August 1st. “Redoxim and Comfert represent an excellent strategic fit for Origin, providing complementary expertise, meaningful geographic extension and strong brand reputation on-farm,” he states.
“The Romanian transactions underline Origin’s strategic priority to scale its technology and service portfolios in new markets with favourable agronomic application opportunity.” Meanwhile, “the Valeo transaction furthers the Group’s capital reallocation objectives, while tightening Origin’s strategic focus as we prioritise the further development of Agri-Services.”