ADM, Alltech launch animal feed joint venture in bid to cut costs

[Archer Daniels Midland Company]
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Archer Daniels Midland (NYSE:ADM [https://seekingalpha.com/symbol/ADM]) said Tuesday it signed a definitive agreement with agricultural products developer Alltech to launch a North American animal feed joint venture [https://seekingalpha.com/pr/20242018-adm-alltech-to-bring-together-unparalleled-expertise-and-experience-in-new-north-american], aiming to reduce costs and simplify its portfolio.

Alltech will contribute its U.S.-based Hubbard Feeds and Canada-based Masterfeeds businesses, including 18 feed mills in the U.S and 15 in Canada, and ADM (NYSE:ADM [https://seekingalpha.com/symbol/ADM]) will contribute its 11 U.S. feed mills to the joint venture that will be majority-owned by Alltech and governed by a board with equal representation from each parent company.

ADM (ADM [https://seekingalpha.com/symbol/ADM]) said in an 8-K filing [https://seekingalpha.com/filing/10444255] that the JV is part of its strategy to diversify its animal nutrition business into higher growth and higher margin specialty animal nutrition ingredients.

"ADM has historically grown its animal feed business through acquisition, but the returns have not worked out so far," Morningstar analyst Seth Goldstein told Reuters. "It makes sense for ADM to look for these kind of partnerships that could add value to its business."

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