DOJ clears flour milling merger

DOJ clears flour milling merger

ConAgra and Horizon Milling must divest four flour mills before forming Ardent Mills.

THE U.S. Department of Justice gave the green light to the proposed new Ardent Mills flour milling joint venture — as long as the partner companies sell four mills that could reduce competition after the formation.

Ardent Mills would combine the flour milling assets of ConAgra Mills, a subsidiary of ConAgra Foods Inc., and Horizon Milling LLC, a joint venture between Cargill Inc. and CHS Inc.

DOJ said it will require ConAgra Foods, Cargill, CHS and Horizon Milling to divest four competitively significant flour mills in order to proceed with the formation of Ardent Mills.

The department said the divestitures will preserve flour milling competition in four regions of the country encompassing large cities such as Los Angeles, Cal.; Dallas, Texas; Minneapolis, Minn., and the San Francisco/Oakland bay area of California, resulting in more competitive prices for wheat flour buyers and lower prices for consumers who purchase wheat flour-based products.

The DOJ Antitrust Division filed a civil antitrust lawsuit May 21 in the U.S. District Court for the District of Columbia to block the proposed joint venture. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit. DOJ was assisted in its investigation by the California Attorney General's Office.

"Without the Antitrust Division's required divestitures, the creation of Ardent Mills would have resulted in less competition in the sale of wheat flour, resulting in customers, such as industrial bakers and foodservice companies, paying higher prices for wheat flour and, ultimately, consumers paying more for products they enjoy in their everyday lives, such as bread, cookies and crackers," said Renata B. Hesse, deputy assistant attorney general for the DOJ Antitrust Division. "The divestitures will ensure that competition for hard and soft wheat flour sales is preserved in regions surrounding Los Angeles, Dallas, Minneapolis and the bay area."

DOJ said without the divestitures, prices for hard wheat flour could be higher in northern and southern California, northern Texas and the Upper Midwest, and prices for soft wheat flour would be higher in southern California and northern Texas.

Both types of flour are made and sold by flour millers — like ConAgra Mills and Horizon Milling — to industrial bakers, food processors, foodservice companies, distributors and retailers.

Consumer group Food & Water Watch was disappointed that DOJ did not block the proposed joint venture, claiming that requiring the divesture of four mills "will do little to curb the market power of the Cargill/ConAgra/CHS mega-miller known as Ardent Mills" and adding that Ardent Mills will have a "stranglehold over most wheat farmers from the Rocky Mountains to the Mississippi River."

The group also noted that DOJ earlier this month approved a deal to join Milner Milling, Pendleton Milling and Cereal Food Processors (CFP), a merger that made CFP 60% larger. The approval of these two deals leaves the top four firms with nearly two-thirds of the flour market, according to a statement from Food & Water Watch executive director Wenonah Hauter.

The DOJ complaint alleges that, in the relevant markets, the proposed joint venture would eliminate head-to-head competition between ConAgra Mills and Horizon Milling, increase the likelihood that flour milling capacity would be closed and increase the likelihood of anticompetitive coordination among flour millers, which would raise flour prices for customers in the relevant markets.

As such, the proposed settlement requires the companies to divest the following four mills to Miller Milling Co. LLC: ConAgra Mills' flour mills in Oakland, Cal.; Saginaw, Texas, and New Prague, Minn., and Horizon Milling's Los Angeles mill.

Miller Milling is a Minneapolis-based subsidiary of Japan's Nisshin Seifun Group Inc. Miller Milling has only a minimal presence in the regions of concern; its acquisition of the divested mills will create a substantial, independent and economically viable competitor in each relevant market, DOJ explained.

The proposed settlement also prohibits the companies from exchanging information related to wheat purchases or used by customers to which the companies have sold wheat.

ConAgra Mills operates 21 flour mills in the U.S. and reported revenues of $1.8 billion in 2012.

Horizon Milling — 76% of which is owned by Cargill and 24% by CHS — operates 20 wheat flour mills in the U.S. and reported revenues of $2.5 billion in 2012.

Volume:86 Issue:21

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