UPDATE 2-Flour power: ConAgra, Cargill and CHS combine milling
* Deal expected to close later this year
* Milling operations had total sales last year of $4.3 bln
* ConAgra, Cargill each to have 44 pct stake, CHS 12 pct
* Deal encompasses 44 flour mills, 3 bakery mix facilities
March 5 (Reuters) - Giant U.S. food and grain-handling companies ConAgra Foods Inc, Cargill and CHS Inc on Tuesday said they plan to combine their North American flour milling businesses into a new company called Ardent Mills.
The venture, which the companies expect to launch later this year, encompasses 44 flour mills, three bakery mix facilities and a specialty bakery, with locations in the United States, Canada and Puerto Rico.
The venture will aim to serve bakery and food companies with more cost-effective supply chains and more innovative products and processes, the companies said in a joint statement. By combining operations, which last year did roughly $4.3 billion in sales, the three also hope to better handle commodity price volatility and increasingly sophisticated food safety requirements, they said.
"The future of flour milling is tied to serving the innovation and supply chain management challenges of food producers," Scott Portnoy, corporate vice president of Cargill, said in a statement. "It (Ardent Mills) will have the knowledge and experience to help customers develop foods that appeal to consumers' changing taste and texture preferences, while also meeting their nutritional needs."
Ardent Mills will combine ConAgra Mills with Horizon Milling, the joint venture that Cargill and CHS formed in 2002. Horizon is considered the No. 1 U.S. miller in terms of milling capacity and ConAgra is third after ADM Milling.
Omaha, Nebraska-based ConAgra and Minneapolis-based Cargill, will each have a 44 percent stake in the joint venture. CHS, based in St. Paul, Minnesota, will control the remaining 12 percent. All three companies will have representatives on the Ardent board.
Horizon is seen as the top U.S. milling company, with total daily milling capacity of 290,500 cwt; followed by ADM Milling, which has 281,100 cwt daily milling capacity; and ConAgra with 255,100 cwt daily milling capacity.
Horizon Milling President Dan Dye will become chief executive officer of the new company, and Bill Stoufer, current president of ConAgra Mills, will become Ardent Mills' chief operating officer and chief integration officer. The headquarters will be determined later, the companies said.
Each partner will contribute their respective milling operations to Ardent Mills on a cash-free, debt-free basis in exchange for the agreed ownership interests.
Sales for ConAgra Mills, currently part of ConAgra Foods' commercial foods segment, were roughly $1.8 billion for the fiscal year that ended May 27, 2012. Sales for Horizon Milling were about $2.5 billion in its fiscal year that ended May 31, 2012.
Ardent Mills will be self-financed through cash flow from operations and its own bank debt and credit facility, the companies said. Cash distributions from Ardent Mills will be delivered to the partners at closing, with initial estimates of the total proceeds to be distributed ranging from $800 million to $1 billion, they said.