Grain handlers GrainCorp and Cargill Australia have sold their Allied Mills joint venture to private equity firm Pacific Equity Partners.
GrainCorp, which owned 60% of the flour and bakery pre-mix supplier, announced the deal on January 31, and said 40% owner Cargill Australia had also agreed to sell its stake.
PEP will pay GrainCorp $190 million for its share of the business.
“This transaction is consistent with our strategy to proactively manage our portfolio to improve returns,” GrainCorp managing director and chief executive Mark Palmquist said.
“The interest shown by PEP to acquire full control of Allied Mills provided us with an excellent opportunity to realise the value in Allied and create balance sheet flexibility for the future.”
GrainCorp and Cargill have been joint investors in Allied for more than 15 years.
“We would like to thank the management and employees of Allied Mills for our successful relationship over such a long period,” Palmquist said.
GrainCorp chief financial officer Alistair Bell said the $190 million injection would provide the company with flexibility as it approaches “peak gearing,” and would remain available for “other redeployment opportunities”.
“Over a number of years GrainCorp has been investing in a series of capital projects and as these projects are completing, our focus has been on maintaining a disciplined approach to capital management and portfolio optimisation,” Bell said.
“This sale of an equity investment in Allied Mills creates an opportunity to realise value, reduce gearing and improve our returns.”
PEP said it would add Allied to its Pinnacle business, a bakery products and ingredients supplier it acquired in 2015.
“Since acquiring Pinnacle, PEP has substantially increased investment in both R&D and manufacturing capability and demonstrated an unwavering focus on delivering great results for our customers,” Pinnacle boss James Ajaka said.
“The combination of Pinnacle and Allied Mills offers a unique opportunity to generate value through category-leading innovation and technology solutions while embedding a world-class supply chain which can service more customers, more often.”
PEP managing director Tony Duthie added: “This is a rare combination of complementary business operating in truly adjacent categories. PEP has a proven track record of investing in consumer product businesses and we intend to invest significantly to grow and support the integrated business.”