Ruminant feed firm acquisition will allow NWF expand and save on costs: analyst

The deal was announced last week. 

Shore Capital analyst Phil Carroll said no financial details were disclosed in relation to the transaction: “But we have assumed a cost of £5m ($7.14m) which would represent NWF’s typical bolt-on type deal historically,”​ he said. 

Carroll said the acquisition will enable NWF to save on distribution costs, especially in relation to compound feed, while also broadening the group’s geographic exposure. 

“The acquisition delivers strategically important manufacturing facilities to support Jim Peet and NWF feed production and it will supply customers in the north of England and Scotland and complements NWF’s existing facilities in the Midlands and the South West.​ ​

In volume terms the acquisition adds around 9% to current feed volumes sold. We believe it also adds some further diversification to the types of feed it [NWF] sells,”​ said the analyst. 

Jim Peet started trading in 1977 and supplies over 50,000 tons of compound and blends to dairy, beef and sheep farmers across the north of England and south-west Scotland. 

The business produces a range of compounds and blends from two production sites – one near Carlisle and the other near Wigton. 

NWF manufactured 567,000 tons of feed last year, of which an estimated 100,000 tons was sold into northern UK markets. ​

“From an earnings perspective, we expect the deal to have no real impact in FY2016 [for NWF] and to be slightly incremental in FY2017, again taking a prudent view,”​ said Carroll. 

The cost savings and incremental throughput to the Jim Peet business does provide some potential for outperformance against Shore Capital’s expectations, he continued.

“It is positive to see NWF management utilizing its balance sheet to strengthen the group’s business at this point in the cycle,”​ added Carroll.

He told FeedNavigator he would expect more bolt on type buys by UK agribusiness players in the coming 12 months, amid increasing industry consolidation in that market. 

InVivo bolsters lab business

In other acquisition news, InVivo NSA, added to its lab assets in February through its purchase of an Italian agribusiness focused analytical laboratory specializing in animal science, toxicology and pollutants. 

The French group said Modena based, Agrindustria, has particular expertise in the field of dioxins, mycotoxins and pesticides. 

The analysis laboratories subsidiary of the group, InVivo Labs, has three analytical laboratories in France and a network of similar facilities globally including labs in Brazil, China, and Vietnam. 

The Italian lab deal came only a few weeks after the acquisition of Netherlands based organic acids producer, Daavision, by InVivo NSA.

InVivo NSA attracted €215m ($235.3m) from investors, led by private equity firm Eurazeo, back in March 2015.

It said then the funds generated demonstrated “investor confidence in InVivo NSA's sustainable growth strategy” ​with the capital set to help it accelerate its international development.