ADM to buy France's Neovia as it expands into fast-growing feeds

By Sybille de La Hamaide

PARIS (Reuters) - Archer Daniels Midland Company (ADM) is in exclusive talks to take over French animal feed business Neovia for 1.5 billion euros ($1.75 billion) as part of the U.S. farm giant's strategy to expand in the fast growing animal nutrition sector.

Neovia is majority owned by French cooperative group InVivo. Investment group Eurazeo also has a 17 percent stake.

ADM and its rivals such as Bunge, Cargill and Louis Dreyfus Company have been forced to review their approach in recent years as a global oversupply of food commodities has made it tough to turn a profit on their core business: buying, processing and selling soy, corn and wheat.

Chicago-based ADM said in March it was shifting its business segments into four new units - carbohydrate solutions, nutrition, oilseeds and origination - to differentiate its offerings to customers.

"We were happy with our animal feed activities but it was too local," ADM President Europe, Middle East and Africa Pierre-Christophe Duprat told Reuters. "If we wanted to expand we needed a more global approach."

"The opportunity came with Neovia. There are not many actors on the market and ... their product and geographical mix suited us."

The acquisition, first reported by Reuters, would be ADM's second largest to date after it purchase natural food ingredients company Wild Flavors in 2014, Duprat said. The Wild Flavors deal was worth $3 billion.

Founded in France in 1954, Neovia produces and sells a range of nutritional products for animal feed producers. Its activities include premix and high value-added services, pet care, aquaculture, additives and ingredients, and complete animal feed.

It has a large presence in Europe, Southeast Asia, Central and South America while it is limited in North America.

NEW UNIT

InVivo is France's largest cooperative group, gathering 206 cooperatives and employing 10,200 people in 34 countries. Sales stood at 5.5 billion euros in 2016/17.

Of this, Neovia had sales of 1.7 billion euros ($2 billion)in 2017, of which 75 percent from outside Europe.

ADM would divert all its feed activities into Neovia's to create a new unit, called ADM-Neovia, with combined sales approaching $3.5 billion, said Duprat.

Eurazeo said at the end of last year it wanted to review its stake, which served as a trigger, Duprat said, although he said taking full control of Neovia was not ADM's initial idea.

"The sale of Neovia will enable us to accelerate our transformation by favouring investments in our growth levers: agriculture, agribusiness and wine, and retail and digital, in France and abroad," InVivo CEO Thierry Blandinieres said in a statement.

The acquisition would be 100 percent cash and is expected to be finalised in the fourth quarter of the year after a consultation process involving employee representatives and pending supervisory authority approval.

ADM had been a partner of InVivo in German grain trader Toepfer until 2014 and they now have joint stake in British grain trader Gleadell.

($1 = 0.8591 euros)

(Reporting by Sybille de La Hamaide; Editing by Sudip Kar-Gupta and Edmund Blair)