The consolidation of UK agriculture took another set forward when Origin Enterprises bought the fertilizer business of Carr's Milling Industries – which gained firepower for its own acquisitions.

Irish-based Origin agreed to pay £24.9m, including debt, for Carr's 13-year old fertilizer business, a blender and retailer of nutrients.

The purchase will expand Origin's own England-based fertilizer operation, and represents the group's third UK acquisition this year after landscaping group Rigby Taylor and crop advisor United Agri Products.

For Carr's, the deal will provide cash to pay down the pension deficit by £3m and still leave more than enough, in theory, to cover the group's £20m borrowings.

"The funds received will eliminate debt, leaving ample opportunity for reinvestment at some future point in the other group activities," Nicola Mallard at house broker Investec said.

Farm deals 

Indeed, the windfall may allow Carr's itself to renew an acquisition spree which last year included feed groups Scotmin and AC Burn.

"Carr's has a record as an agriculture industry consolidator," a person familiar with the company said, adding that it was likely to "look for opportunities" for further deals.

Other farm groups seeking to grow through acquisitions include Wynnstay Group, which last month added Wrekin Grain, a grain trader and farm retailer, to a list of takeovers which has also included Woodheads Seeds, Young Animal Feeds and Welsh Feed Producers.

Booming business

In Dublin, shares in Origin gained 1.3% to E3.80 on the acquisition of a fertilizer business which achieved pre-tax profits of £2.3m in the first half of its financial year, on revenues of £35.5m, after a loss-making performance in 2009-10.

"Carrs Fertilizer experienced strong demand and continuing high cereal prices and anticipation of higher fertilizer raw materials prices caused a larger-than-expected number of farmers to buy stock," Carr's said.

Shares in Carr's itself, which acknowledged the deal would be dilutive to earnings "in the short-term", closed down 2.9% to 814p in London.

Analysts' reaction 

Nonetheless, analysts remained sanguine about Carr's stock, noting that the sale of the fertilizer business would, while denting immediate prospects for profits, cut the group's exposure to a volatile sector.

"The disposal is good strategically, reducing a source of substantial volatility on group profits, but until the proceeds from the transaction are used to acquire other businesses, future earnings are reduced," Anne Margaret Crow at WH Ireland said, while lowering her rating on Carr's shares to "outperform" from "buy".

Mr Crow cut her target price for the shares to 880p from 900p.

At Investec, Ms Mallard restated a "buy" recommendation, and lifted her target price on the stock to 905p from 838p to reflect Carr's more stable earnings profile.