Land
O’Lakes will buy Purina Mills for $230 million. The dairy cooperative is trying
to stay competitive in the shrinking US market for livestock and animal feed.
But the future of the US livestock industry is not clear. Although the US has
so far avoided the devastation of BSE (“mad cow”) and foot and mouth, consumers
are still showing concern, leading to a decrease in demand for red meat and
red meat products. Dairy cooperative Land O’Lakes Inc. announced on Monday that
it would buy third largest feed producer Purina Mills for approximately $230
million in cash to enhance its competitive position in the consolidating feed
industry. Purina Mills will become part of Land O’Lakes Farmland Feed LLC following
the acquisition. The company will add about $425 million in annual sales to
Land O’Lakes’ nearly $6 billion annual sales.
Go deeper with GlobalData
Land O’Lakes CEO Jack Gherty commented, “We are building economies of scale
and critical mass to compete nationally in the consolidating feed industry.
This transaction clearly has positive implications for the long-term success
of our farmer-owned feed system.”
Although the US has so far avoided BSE (“mad cow”) and foot and mouth disease,
consumer concern has nonetheless dampened the market for meat in the US. Red
meat production grew only 0.05% in 2000, compared to 4.4% in 1998 and 2.2% in
1999, while production of pork, lamb and mutton have all fallen in the past
year.
As a result, according to the Feed Situation and Outlook Yearbook, published
in April 2001 by the US Department of Agriculture, feed use in September-August
2000/01 is expected to be down marginally from the 166.1 million tons used in
September-August 1999/2000.
To further complicate the acquisition, Purina Mills will maintain its trademark,
product lines, and sales and marketing team, together with a nationwide dealer
network. It will remain in St Louis, Missouri. Land O’Lakes, a farmer-owned
co-operative, is based in Minnesota. Given the stagnant state of the US livestock
industry and the decreased demand for feed, direct competition between Land
O’Lakes and Purina Mills products could cannibalize overall business, doing
little to enhance competitive positioning for the newly merged company.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData(c) 2001 Datamonitor. All rights reserved. Republication or redistribution,
including by framing or similar means, is expressly prohibited without prior
written consent. Datamonitor shall not be liable for errors or delays in the
content, or for any actions taken in reliance thereon.
