Cargill Inc., CHS Inc. and ConAgra Foods Inc. announced Tuesday that they will combine their North American flour mill operations in the biggest milling industry deal in recent history, one that will create an unparalleled flour powerhouse with over $4 billion in sales.

Minnetonka-based Cargill and Inver Grove Heights-based CHS will unite their 11-year old joint venture, Horizon Milling, with Omaha-based ConAgra’s flour milling division in a new company called Ardent Mills.

Horizon is already the top U.S. miller with 18 percent of the market, while ConAgra is No. 3 with 16 percent, according to Milling & Baking News, a trade publication.

“This is a heckuva big deal,” said Ed Usset, a grain marketing specialist at the University of Minnesota.

The combination is driven by the search for cost efficiencies in a mature business, as well as for ways to boost innovation in one of the most basic industries.

The new joint venture’s combined operations will include 44 flour mills, three bakery mix facilities and a specialty bakery, all in the United States, Canada and Puerto Rico. ConAgra and Cargill will each own a 44 percent stake in Ardent; CHS, the largest U.S. agricultural cooperative, will own 12 percent.

While Horizon Milling’s headquarters are within Cargill’s Minnetonka office complex, Ardent’s home base has yet to be determined. That decision will be based on both customer and employee considerations, said Scott Portnoy, corporate vice president at Cargill, which owns 76 percent of Horizon compared with CHS’ 24 percent.

The new joint venture will be headed by Dan Dye, currently president and CEO of Horizon Milling, while Bill Stoufer, current president of ConAgra Mills, will serve as Ardent Mills’ chief operating officer.

Horizon has 275 employees in Minnesota, spread across its headquarters, a nearby baking lab and flour mills in Mankato, Rush City and Lake City. ConAgra has flour mills in Hastings and New Prague.

There are no plans to shut down any flour mills that will be included in Ardent, Portnoy said. “The idea of the deal is that all of the mills within the ConAgra and Horizon Mills footprint are necessary.”

Still, the joint venture expects to harvest significant cost efficiencies. For instance, transportation and supply chain costs will be reduced as Ardent will have more locations to serve national customers, said Mark Palmquist, chief operating officer for CHS’ ag business. “You’re reducing costs on a per bun or per loaf basis.”

Horizon Milling and ConAgra both sell flour and baking mixes to customers in the packaged food, baking and food service industries. Such commercial users comprise most of the flour market.

But flour demand is not growing. In fact, per capita sales for the industry have been declining 1 to 2 percent annually in recent years, Portnoy said.

According to a recent report by market researcher IBISWorld, consumer trends have contributed to a decline in wheat flour consumption. Consumers have been wary about the “carbohydrate-heavy” nature of bread and pasta, which has been linked to weight gain.

Still, pockets of the industry are growing, particularly for whole wheat and gluten-free flour. “We have to be able to innovate and help customers grow in these niche spaces, and we think [the joint venture] will create a hybrid vigor,” Portnoy said.

Essentially, Ardent should have more research and development firepower.

The Ardent deal is expected to be completed in late 2013, after regulatory clearances, financing and satisfaction of customer closing conditions. The joint venture expects to take on new debt of no less than $600 million for working capital needs.

Horizon has $2.5 billion in annual sales and about 1,400 employees; ConAgra’s milling division, $1.8 billion and about 1,000 workers. Flour milling makes up a relatively small percentage of sales for all three owners of Ardent, particularly global agribusiness giant Cargill.

But Minnesota has long been a hub for the U.S. milling industry and is still a top flour-producing state, according to Milling & Baking News.

Plus, the Twin Cities, in addition to serving as Horizon Milling’s headquarters, is home base to General Mills Inc., the nation’s sixth-largest miller and owner of the dominant U.S. retail flour brand, Gold Medal.


Staff writer Patrick Kennedy contributed to this report.