ADM expanding in Europe through U.K. flour milling

by Teresa Acklin
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   DECATUR, ILLINOIS, U.S. — In an expansion of its European food operations, Archer Daniels Midland Co. will enter the U.K. flour milling business through the acquisition of four wheat flour mills from Tomkins P.L.C., London.

   “Tomkins' sale of the four Spillers flour mills in Avonmouth, Tilbury, Liverpool and New Castle, England, provides ADM an excellent opportunity to expand our existing European production base of food products,” said Craig L. Hamlin, president of ADM Milling Co.

   Tomkins, the parent of the Rank Hovis milling operation, announced March 31 that it had reached agreement for the sale of the four British mills to ADM. The mills were among six that Tomkins acquired in March 1998 from Kerry Group P.L.C., Dublin, Ireland, for £97 million.

    The U.K. Secretary of State for Trade and Industry last September upheld a recommendation of the Monopolies and Mergers Commission that Tomkins should divest four of the six mills The purchase price of the four mills, and related office and technical facilities, was not disclosed. Tomkins said the net asset value of the businesses as of last Oct. 31 was £33 million, which at current exchange rates is equal to U.S.$53 million.

   Tomkins in January took a £40-million charge against the estimated loss on disposal of the four mills, including the write-off of goodwill on acquisition. That provision will be sufficient to cover the divestiture, Tomkins said last week.

   Completion of the transaction with ADM is expected by April 30.

   “The director general of the Office of Fair Trading has approved the purchaser and confirmed that the acquisition by ADM will not give rise to a merger qualifying for consideration under the Fair Trading Act,” Tomkins said.

   While new to flour milling in Europe, ADM has a major presence in other agriculture and food operations there. That includes a partnership with A.C. Toepfer International, one of the world's leading agricultural trading companies. ADM also has crushing facilities for soybeans and sunflowerseed in Europe, in addition to four plants in Europe that produce meat and dairy alternatives.

   ADM Milling is North America's largest flour milling company, operating 29 mills in the United States and 11 in Canada. It is a joint venture partner in Molinera de Mexico, a Mexican flour milling company. ADM also is involved in flour milling in Jamaica, Belize and Barbados.

   In its report that led to the Tomkins divestment order, the U.K. Monopolies and Mergers Commission said that a new owner with no existing involvement in the industry acquiring the four mills would have a 14% share of the “free flour” market in the United Kingdom and would be positioned “to offer effective competition” in that market. In the U.K., free flour is that sold commercially rather than used by a miller's own baking business.

   On the basis of a six-day grind, the four mills being acquired by ADM have a combined daily flour milling capacity of about 25,000 cwts.