(6) Acquisitions

Acquisitions 2009

In 2009, Nutreco acquired the following companies/businesses:

Animal nutrition business of Cargill in Spain and Portugal

On 28 July 2009 Nutreco announced that it has acquired the animal nutrition business of Cargill in Spain and Portugal. The acquisition includes Cargill’s 12 compound feed production facilities, with a production volume of around 700,000 metric tonnes, annual sales of approximately EUR 240 million and 422 employees. With this acquisition Nutreco strengthens its leading market position in animal nutrition in the region. Following clearance given by the European commission, closing of the transaction took place on 30 November 2009.

The acquired business offers animal nutrition solutions for all farmed animal species. After integration and transformation, the acquired business is expected to contribute a similar operating margin as Nutreco’s compound feed business in Spain and Portugal in two years’ time. The total investment for this acquisition is approximately EUR 40 million, which includes integration and transformation costs and investments in production locations in the next two years.

Fri-Ribe

On Monday 2 November 2009 before opening of stock markets, Nutreco announced that it has acquired a 51% shareholding in a Brazilian animal nutrition and fish feed business, named ‘Fri-Ribe’. This provides Nutreco and its partners, the existing owners, with a platform for jointly building a strong position in one of the most important agricultural growth markets in the world. The closing of the transaction took place on 30 October 2009. The opening balance of Fri-Ribe is provisionally determined, due to the timing of the acquisition, and will be finalised in the course of 2010.

The company is active in the production and sales of premixes, farm minerals, compound feed, horse feed, pet food and fish feed. It consists of two privately owned companies Rações Fri Ribe S.A. (Fri-Ribe) and Dispa-Indústria de Rações S.A. that operate under the brand of Fri-Ribe. They are an important player in Brazil for shrimp and tilapia fish feed and also have important regional market positions in nutrition for beef cattle, dairy cattle and for horse feed. The companies have five production plants and six sales offices spread across the centre and north-east of Brazil. The companies have 400 employees and annual revenues amounted to EUR 47 million in 2008.

Negative goodwill

The acquisition of the animal nutrition business of Cargill in Spain and Portugal resulted in a negative goodwill of EUR 11.2 million, which is reported in other operating income. In accordance with IFRS 3, the information and valuation was reassessed before recognising this negative goodwill as a profit in the income statement. The negative goodwill is the result of the consideration paid and the market value of the net identifiable assets and liabilities.

Next,  as a consequence of the strategic plans for Spain and Portugal, Nutreco performed impairment reviews on the recognised values. Nutreco concluded that an impairment charge of EUR 3.9 million was required.

Total results of Nutreco

Total revenues of the acquisitions in 2009 which are included in the consolidated financial statements amount to EUR 23.4 million. Total revenues for the full year 2009 of these acquisitions amount to EUR 287.0 million.

The acquisitions completed in 2009 and 2008 had the following effect on the income statement of the respective years:

 

(EUR x million)	2009	2008
Revenue	23.4	83.8
Operating result before amortisation	4.0	8.4
Operating result	3.9	8.2
Total result for the period	2.3	2.3

 

Assets and liabilities acquisitions 2009

The acquisitions in 2009 had the following effect on Nutreco’s assets and liabilities on acquisition date:

 

 

Acquisitions 2008

In 2008, Nutreco acquired the following companies/businesses:

Marine Feed

 

On 11 January 2008, Skretting Japan acquired the fish feed production facilities of Marine Net Co. Ltd. Previous to the acquisition, Marine Feed already produced the majority of the fish feed for Skretting Japan. The purchase consideration amounts to EUR 10.2 million, including investments in working capital, property, plant and equipment. The annualised revenues of Marine Feed amount to EUR 29.0 million and 43 employees are involved in this transaction.

With this transaction Nutreco acquired the largest extruded feed factory in Japan, located in the international seaport city of Imari. This acquisition enables Skretting to further optimise its production. Hence, it allows Skretting to further secure the quality, safety and traceability of their products which is increasingly demanded by Japanese customers.

The fish market for Japanese marine fish is one of the biggest in the world with an annual production volume at around 600,000 ton. The major fish species for which feed is produced are yellowtail and red sea bream. Skretting had a market share in Japan of approximately 8%. This acquisition enables Skretting to further grow its business.

Silver Cup

On 18 January 2008, Skretting announced the acquisition of Nelson and Sons, Inc., the manufacturer of Silver Cup fish feed. The company has two production facilities near Salt Lake City, Utah, in the USA. The total consideration for this transaction is EUR 10.1 million.

Nelson and Sons has 53 employees and started to produce fish feed in 1956. The company produces fish feed for the freshwater markets in Western USA, has a significant share in the Idaho trout business, and is also active in Canada and Mexico. The total annual feed production is around 30,000 ton and the annual revenues approximate EUR 20.0 million.

Copaga

On 1 February 2008, Nutreco completed the acquisition of the feed and meat assets of Copaga in Catalonia, Spain, for a total consideration of EUR 32.7 million. EUR 22.7 million of this consideration relates to the acquired feed production and pig integration businesses and includes investments in working capital. EUR 10.0 million is paid to obtain the ownership of the poultry processing facility which has been leased by Nutreco since July 2000. The acquisition adds approximately EUR 24 million in annual revenues and the workforce increases with 75 employees.

The feed factory has a capacity of approximately 300,000 ton and will strengthen Nutreco’s market position in the region. The pig integration business of Copaga produces approximately 200,000 pigs per year.

Biofaktory

On 31 July 2008, Nutreco acquired Biofaktory, a premix and specialty feed company with production facilities in the Czech Republic and Slovakia. The purchase consideration is EUR 13.0 million.

Biofaktory is the market leader in premix and specialty feed in the Czech Republic and in Slovakia. The company also exports to other countries in Central and Eastern Europe. Having a strong research and development background and technical advisory focus, the company is capable to facilitate competitive animal production by its clients. In addition, Biofaktory holds 54% of the shares in Integra, a small layer pullet and hatchery company. This company was divested in 2009.

Biofaktory has annual revenues of approximately EUR 30 million and a workforce of 220 employees.

Negative goodwill

The acquisitions of Marine Feed, Copaga and Biofaktory resulted in a negative goodwill of EUR 10.2 million in total, which is reported in other operating income. The negative goodwill was partly offset by restructuring costs of EUR 4.0 million incurred for these acquisitions after the acquisition date.

Restructuring costs are recorded in other operating expenses and personnel costs.

 

Total results of Nutreco

Total revenues of these four acquired companies amount to EUR 104.6 million for the full year 2008. An amount of

EUR 83.8 million is included in the consolidated financial statements.

The total results before tax of these acquired companies generated after acquisition amounts to EUR 2.3 million in 2008. This amount is included in the consolidated results of Nutreco. The full year result before tax of these companies amounts to EUR 6.7 million.

Assets and liabilities acquisitions 2008

The acquisitions in 2008 had the following effect on Nutreco’s assets and liabilities on acquisition date:

 

 

In 2008 and 2009, the following adjustments have been made to the valuation of assets which are part of the acquisition of Nutreco Canada in 2007 following a restructuring plan:

2009:

• Two plants were impaired for EUR 3.1 million;
• Intangible assets were impaired for EUR 0.3 million;
• The investment Isoporc Inc. was fully impaired for EUR 1.0 million.

2008:

• A plant in Western Canada was written down for EUR 1.4 million and offset to goodwill in 2008;
• The information technology was reduced by EUR 1.1 million and offset to tax in 2008;
• The investment in associates were adjusted by EUR 1.4 million and offset to software in 2008.

No cash was involved with these transactions.

Acquisition of minority interest

In 2009 and 2008 Nutreco acquired no minority interest.

 

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