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Land O'Lakes Acquires Ceres in Latest Round of Ag Consolidation

Transaction Comes as Smaller Firms Can't Keep Up With Merging Giants

Land O’Lakes Inc. said it would buy Ceres, a grain storage and commodity logistics company, in an all-cash transaction valued at $17.2 million, the latest in a series of acquisitions in the agriculture industry.

Privately held Land O’Lakes, perhaps best known for its dairy products and Purina brand pet foods, said it would pay 40¢ a share for Ceres, a St. Louis Park, Minnesota, breeding and biotechnology firm that markets seed products under its Blade brand. Ceres also stores, handles, and merchandises grain. 

The move is the latest in a string of mergers and acquisitions activity in the agriculture sector. ChemChina is in the midst of a $43 billion acquisition of Swiss seed and pesticide multinational Syngenta AG, a deal that’s going through regulatory reviews. Also undergoing regulatory scrutiny is a $130 billion merger between DuPont and Dow Chemical.

The Land O’Lakes acquisition of Ceres is small in relative terms but indicative of difficulties encountered by companies that now face the prospect of competing with giant conglomerates.

“It’s getting to a point where a lot of these smaller firms feel they can’t compete with some of these bigger firms, so consolidating might be the best decision in the current climate,” said Jon Marcus, the president of Lakefront Futures & Options in Chicago. “It’s getting to a point where pretty soon it’s just going to be a couple big boys in the business and, honestly, a business decision like this is not a bad deal. For a smaller company, it’s probably the way to go.”

Closely held Land O’Lakes touts itself as “one of America’s premier agribusiness and food companies” and had sales of $13 billion in 2015. The company is a member-owned cooperative. Publicly traded Ceres will become a wholly owned subsidiary of Arden Hills, Minnesota, Land O'Lakes, which will expand its biotechnology and advanced plant-breeding technology with the acquisition.

The boards of both companies have approved the transaction.

Ceres chief executive Richard Hamilton said in a statement that the transaction, expected to close in the third quarter this year, was “in the best interest of the company and its stockholders, and will advance Ceres’ mission of making the production of meat and dairy more scalable and sustainable.”

It’s likely the consolidation within the agriculture industry will continue due to the recent volatility in commodity prices, Marcus said. Small, profitable firms will be targets for the larger businesses that are trying to keep up with the likes of ChemChina, DuPont, and Dow and Bayer, which is trying to acquire Monsanto.

“You’ll always have people looking,” he said. “You’ll always have consolidation because people are always looking for the next chess move But eventually you’ll get to the point where there’s not much left, yet these larger firms want to keep up with the big boys.”

 

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