PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:08 UK, 2nd Dec 2013, by Agrimoney.com
NWF extends UK's ag deal spree with SC Feeds deal

NWF Group stoked the consolidation wave among UK agribusinesses by unveiling the purchase of SC Feeds, fulfilling longstanding plans to find a takeover to boost its agriculture division.

The UK-based fuels to food distribution group said that it had paid up to 6.75m for SC Feeds, based in the Midlands county of Staffordshire, in a deal which will take the group's annual feed volumes above 550,000 tonnes.

The takeover extends something of a deal spree by the UK agribusiness leaders to expand through deals, with Wynnstay buying farm retail group Carmarthen and Pumsaint Farmers two months ago, while Carr's Milling Industries has expanded domestically and abroad through acquisition.

Indeed, Monday's deal looks unlikely to be the last witnessed by the sector, VSA Capital analyst Edward Hugo said.  

"This acquisition is clearly significant for the group and continues the theme of consolidation in the UK agricultural inputs sector," Mr Hugo said.

"With about 25 large animal feed mills operating in the UK, we believe further consolidation is likely."

 'Right opportunity'

NWF, while it has found two takeovers for its fuels business over the past two years, has not within recent memory found an acquisition for its feed division.

 "The group has been focusing for the last couple of years on growing its agriculture side," a person familiar with the group told Agrimoney.com.

"It has been waiting for the right opportunity to come around. And now the right opportunity has come around."

Richard Whiting, the NWF chief executive, said: "This exciting acquisition is in line with the strategic ambition we have set out to develop the group towards a greater focus on agriculture and meeting the needs of farmers in the UK."

SC Feeds, which has been in the ruminant fed market for 22 years, reported a pre-tax profit of 760,000 for the year to the end of April, on revenues of some 20m.

Market reaction

In the City, broker Charles Stanley said that the deal was "in line with the group's strategic acquisition of a greater focus upon agriculture", and restated a "buy" rating on NWF shares.

VSA Capital's Edward Hugo said that "despite a circa 40% increase in its share price since April, NWF continues to trade on lower multiples than its peers", 6.8 times next year's earnings before interest, taxation, depreciation and amortisation (ebitda).

"Like its peers, the key challenge for NWF now is to build on its strong performance last year, without the 'perfect storm' weather which boosted performance across the sector," with the poor UK weather in 2012 spurring demand for feed.

"Selected bolt-on acquisitions to increase market share in existing NWF operational sectors clearly form part of this strategy," Mr Hugo added.

NWF shares closed up 0.4% at 142p in London.

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