LONDON/CHICAGO (Reuters) - Agribusiness giant Cargill CARG.UL will buy animal feeds producer Provimi from private equity firm Permira for 1.5 billion euros ($2.1 billion), the companies said on Monday.
The acquisition by one of the world's largest privately owned corporations will solidify Cargill's dominant position in the animal nutrition business.
Minneapolis-based Cargill last week reported annual earnings for the year ended in May of $2.69 billion, a 35 percent jump from the year before, on sales of $119.5 billion, up 18 percent. It spent $3 billion on acquisitions and expansions last year, including animal feed mills in Russia and Vietnam.
Animal nutrition is a bulwark of agriculture services, one of Cargill's five main lines of business. Among its biggest acquisitions in recent years was Agribrands, a spin-off of Ralston Purina, in 2001. Cargill had acquired feed producer Provimi Kliba in 2002.
"Cargill provided a clear and compelling case to become our owner and we believe that a combination of its animal nutrition business with Provimi will create a stronger business," said Provimi Chairman and CEO Ton van der Laan in a statement.
The deal will see Permira PERM.UL earn about 2.3 times its initial equity investment, a person familiar with the situation said, allowing the firm to return cash to its investors before it starts a fundraising drive in September.
Permira acquired Netherlands-based Provimi in 2007 in a deal valuing the business at 1.5 billion euros. It then reshaped Provimi, disposing of noncore assets including its fish feed and pet foods divisions, and made strategic acquisitions, including Mexican firm NASSA.
The company posted earnings before interest, tax, depreciation and amortization (EBITDA) of 86 million euros in the first half of this year, a rise of 20.3 percent.
Provimi had attracted interest from rival corporate bidders, including a team of Nutreco NUTR.AS and DSM (DSMN.AS) and China's New Hope Group.
Nutreco spokesman Jurgen Pullens said the company was still looking to expand in premix and fish feed and Nutreco had 500 million to 600 million euros available for M&A deals.
"Provimi was for sale, so it was an interesting opportunity, and we will continue our strategy. This was a good opportunity but there are more," he said, adding that Nutreco had doubled its operating profit between 2006 and 2011 with medium-sized deals.
DSM, which had considered a joint bid for Provimi with its smaller rival Nutreco, was not immediately available for comment.
"This statement from Provimi is a strong indication of DSM and Nutreco stepping out of the bidding process and we therefore believe it is unlikely either of these companies will buy Provimi, which we view as a positive," said ING analyst Fabian Smeets.
"DSM's share price has seen a significant decline on the back of the company potentially bidding for Provimi," he said.
$1 = 0.703 euro
(Reporting by Simon Meads in London and Christine Stebbins in Chicago; additional reporting by Aaron Gray-Block; editing by David Hulmes and Matthew Lewis)