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Nisshin Flour Milling to Acquire Four Flour Mills From Horizon Milling and ConAgra

Date Posted: April 24, 2014

Miller Milling Company, LLC ("Mil ler Milling"), a U.S. subsidiary of Nisshin Flour Milling Inc. (Representative Director President, Hiroshi Oeda), announced that it had entered into an asset purchase agreement with Cargill, Horizon Milling and ConAgra Foods Food Ingredients Company, Inc. (collectively, "Sellers") to acquire four flour mills in the U.S. for $215 million (approximately ¥22 billion, "Transaction").

Upon the completion of the Transaction, Miller Milling becomes the fourth largest flour milling company in the U.S. and Nisshin's overseas milling capacity is increased to approximately 50% of its worldwide capacity.

1. Background and Purposes of the Transaction

Nisshin entered the U.S. market, the largest flour market amongst the developed countries, by acquiring Miller Milling in March 2012.

Since then, Nisshin has been actively expanding its businesses in the U.S., by increasing 30% of its milling capacity through expansion of Winchester Mill (Virginia) and Fresno Mill (California) in February 2013, as well as by taking advantage of Nisshin's key strengths including R&D, milling technology, and stable supply of high quality wheat flour.

On another front, Nisshin recognizes that the milling industry in the U.S. is entering a significant reorganization stage as represented by the pending merger of Cargill's Horizon Milling business (No. 1(1) in the U.S.) and ConAgra Foods' flour milling business, ConAgra Mills (No. 3(1») to establish Ardent Mills LLC ("Ardent Mills").

Cereal Food Processors, Inc (No. 4(1») is also said to be under sale process.

Taking such situation into consideration. it was essential for Miller Milling to take strategic initiatives for further growth of its businesses.

The opportunity arose as Ardent Mills' parent companies prepared to divest four flour milling facilities in order to proceed with the formation of Ardent Mills and conclude regulatory reviews by the U.S. Department of Justice ("DOJ").

Accordingly, the Sellers organized a bidding process for the sale of its four mills.

Nisshin made the decision to participate in the process based on the judgment that the Transaction will contribute to its expansion of overseas businesses.

Specifically, each of the four mills has unique characteristics in terms of locations as well as products manufactured and Nisshin believes synergy can be expected with Miller Milling.

Upon the completion of the Transaction, Miller Milling will become the fourth largest flour milling company in the U.S. with milling capacity of approximately 5,900 tons/day (grain based).

2. Strategic Rationale for Nisshin

Nisshin has initiated the mid-term management plan "NNI-120, Speed, Grow1h and Expansion ("NNI-120")" in April 2012 which focuses on expansion of top-line (revenue) as well as overseas businesses.

The Transaction contributes in accelerating to meet management targets of NNI-120 to achieve ¥1 trillion with 30% overseas sales in the near future.

Nisshin has been actively taking initiatives to expand overseas businesses including the acquisitions of Miller Milling in March 2012 and Champion Flour Milling Ltd. in February 2013.

With the Transaction, overseas milling capacity will reach approximately 7,500 tons/day (grain based) which accounts for approximately 50% of total milling capacity of Nisshin; nearly equal to the milling capacity in Japan.

In addition, the Transaction will enable Miller Milling to enhance its ability to gather procurement-related information with significantly increased procurement volume, as well as diversified types of wheat and their origins.

Nisshin finds these advantages highly meaningful for our further global expansion of flour milling businesses.

Nisshin will accelerate the expansion of its U.S. businesses with the Transaction and continue to focus on expansion of overseas businesses going forward.

3. Purchase Price and Overview of the facilities

Miller Milling will acquire four mills as well as inventory as of the closing date of the Transaction (expected around the end of May 2014) in the form of asset purchase from the Sellers.

The purchase price will be $215 million (approximately ¥22.1 billion, $1 for ¥1 03).

Completion of the Transaction is subject to approval of the DOJ.

a. Names of the mills and milling capacities (grain based)

i. Los Angeles Mill ... 780 tons/day

ii. Oakland Mill ... 880 tons/day

iii. Saginaw Mill ... 880 tons/day

iv. New Prague Mill ... 1,120 tons/day

Total ... approximately 3,660 tons/day

Note: Los Angeles Mill will be acquired from Cargill and Horizon Milling while the other three mills will be acquired from ConAgra Foods.

b. Key customers

Key customers include bakeries, confectionery manufacturers, noodle manufacturers, tortilla manufacturers and other food manufacturers.

For more information, call 952-826-6331.

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