Nisshin to acquire Miller Milling Co.

by Josh Sosland
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TOKYO, JAPAN — Nisshin Flour Milling Inc., a subsidiary of Tokyo-based Nisshin Seifun Group Inc., has reached an agreement to acquire Miller Milling Co., Bloomington, Minn.

Miller Milling is the 12th largest flour milling company in the United States, according to the Grain & Milling Annual 2012, published by Sosland Publishing Co. The company also is the newest company wholly dedicated to flour milling among the largest 24 companies in the industry. Miller was established in 1985 by John C. Miller, who is president and chief executive officer of the company.

Miller Milling operates two U.S. flour mills, one in Fresno, Calif., and the second in Winchester, Va. The company has daily milling capacity of 27,500 cwts.

While the total enterprise value was not disclosed, Nisshin said, in a Tokyo Stock Exchange filing, it was paying $122 million for the outstanding shares of Miller Milling. Nisshin did not disclose other details of the purchase price, including assumed long-term debt.

Nisshin said a new subsidiary will be incorporated in the United States to acquire the ownership of Miller with Nisshin Flour Milling owning 80% of the new subsidiary and Nisshin Seifun Group owning the remaining 20%. The transaction is expected to close in March 2012.

“The acquisition of Miller Milling will enable N.S.G.I. to take advantage of the highly experienced and technical capabilities of Miller Milling that operates its core business centered on durum semolina, bakery flour and tortilla flour products,” Nisshin said. “N.S.G.I. plans to further expand its presence in the U.S. by expanding Miller Milling’s existing operations as a part of the group organization into new markets. Toward that goal, N.S.G.I. will utilize the group’s outstanding product development, techniques and capabilities to supply wheat flour that is consistent in quality.”

Nisshin said the acquisition represents a longstanding priority to expand overseas. Indeed, the Nisshin Flour web site has candidly spelled out this ambition for longer than a year.

“To cope with this globalized business environment and factor its implications into its medium- and long-range planning, Nisshin Flour Milling Inc. is in the process of building an international flour milling network, with bases already operating in Canada and Thailand,” the site says.

Nisshin, Japan’s largest flour milling company, first entered the North American milling market in 1989 with the acquisition of Rogers Foods, Ltd., a flour milling operation based in Armstrong, B.C., in Canada. More recently, a second milling operation was opened by Rogers in Chilliwack. The Rogers’ business has combined daily milling capacity of 11,375 cwts.

“N.S.G.I. is confident that its acquisition of Miller Milling Co. will realize synergies both with Rogers Foods and the other group companies that will serve to greatly accelerate the expansion of its presence in the U.S. market,” Nisshin said.

In addition to a significantly enlarged presence in the U.S. milling market, Nisshin said the Miller Milling acquisition will strengthen the Japanese company’s “valuable wheat-related know how,” important since the United States is the largest wheat supplier to Japan.

“Through this (gained) experience, the group will obtain significant benefits and capabilities for further expanding its flour milling operations in the global market,” Nisshin said.

Mr. Miller said the acquisition offers the company he established the best route forward for successful expansion.

“We have been trying for some time to put in place a plan that prepares Miller Milling for future growth and success,” Mr. Miller said. “My partners and I believe that combining Miller Milling with Nisshin Flour Milling is the best way to accomplish that. Our responsibilities to our shareholders, our customers and our employees lead us to conclude that the best path forward would be to take advantage of the many strengths a company like Nisshin can bring to our business while at the same time ensuring and even strengthening the competitive marketplace our customers’ currently enjoy. I know that Nisshin shares our belief that Miller Milling is well positioned for growth and expansion. And I am especially pleased Nisshin will rely on current Miller Milling management and employees to take Miller Milling to the next level. Our acquisition by Nisshin is positive in many ways for Miller Milling’s shareholders, customers and employees.”

Not included in the transaction is Tablex Miller, S.A. de C.V., a durum mill located in Navojoa, Sonora in Mexico. A joint venture partly owned by Miller Milling, the company operates a durum mill with 5,000 cwts of daily capacity.

The Nisshin announcement ends what likely was the longest hiatus ever in merger and acquisition activity in U.S. flour milling. The last major transaction in the industry was the September 2001 announcement that CHS Inc. and Cargill were establishing the milling partnership that has become Horizon Milling L.L.C.
Established in 1900, Nisshin Seifun is a diversified company with operations not only in flour milling, but also in processed foods, health foods, health care, yeast, pet foods, engineering and mesh cloth. Its food business product line includes pasta, pasta sauces, premixes, flour for consumer use, heat-and-serve products, dried noodles, chilled and frozen food products.

Traded on the Tokyo Stock Exchange, Nisshin Seifun has a market capitalization of Y244 billion ($3 billion). In the year ended March 31, 2011, Nisshin sales were Y424 billion ($5.3 billion) and net income was Y14.2 billion ($177 million).

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