Merger to form new force in the cereals

Grainfarmers and Centaur Grain have announced plans to establish a major new grain marketing and input supply business that will be controlled by British farmers.                    The new company will have a strong business model focussing on building long-term supply chain partnerships creating value for its farmer-owners and its customers.

It is hoped that shareholders and members will support the new business – which will be branded Openfield - and is expected to handle around 4m tonnes of grain – 20% of the UK market – working with over 7000 farmers.

Announcing the initiative, the proposed Chairman of the merged business, Richard Beldam said that Openfield aims to be the first choice grain business for both farmers and customers alike.

“Openfield will have the flexibility, scale and high level of service which we believe is needed in today’s marketplace to capture improved value across the supply chain,” he said.

“Increasingly we believe this can only be achieved by companies that combine a national presence with a scale and structure that ensures efficient continuity of supply to its customers, managed through a network of regional offices.

“As our major customers continue to grow in size and influence, we have to do the same. Many of them are now looking for longer term committed supply contracts and Openfield fully intends to promote a similar expansion of the committed grain principle to support these contracts.

“The aim is to ensure better continuity of supply of assured grain of known quality across the UK and at the same time guarantee provenance for some internationally recognised brands through our strong local network of farmers,” said Mr Beldam.

In order to help meet industry’s needs, Openfield will be actively looking to develop its on-going relationship with a combined UK-wide network of independent farmer-owned central storage businesses handling around 900,000 tonnes of grain/annum.

Openfield will also be looking to grow its existing arable inputs business. When combined, the business will become the third largest supplier in the UK by volume of both seed and fertilisers. It will also be a significant supplier of agrochemicals through an ongoing commercial relationship with UAP.

In a linked announcement, Openfield will appoint DHL Exel Supply Chain to handle the procurement of grain haulage. This follows a successful Centaur and Grainfarmers joint project earlier in the year, which has helped underline the potential benefits of such collaboration.

As a result, DHL Exel Supply Chain will establish a ‘control tower’ at Openfield’s Colsterworth, Lincs headquarters which is expected to be responsible for around 120,000 grain movements/annum. The objective is to deliver the most efficient supply chain in the grain industry one that is expected to reduce the road miles required to handle the same amount of grain by up to 10% per annum. The organisation of actual farm collections will continue in its current form.

The next step in the new company’s formation is to consult with both sets of shareholders and members. They will be asked to back the Board’s proposals prior to the new company’s launch in November.

Openfield intends to establish a farmer council to represent the views of the new shareholders. Current Grainfarmers MD, Tim Davies will become Chief Executive.

“We have an exciting opportunity to combine the best of both businesses in the new venture; a company that meets everyone’s needs across the supply chain,” he said.

“I believe Openfield will deliver increased value to farmers and customers alike through excellent marketing performance and logistical innovation.

“It will secure these advantages within a structure that not only reduces risk for our members/growers but also provides a secure long-term business proposition, offering added-value returns to its owners.

“In looking at the two existing businesses, there is a particularly good fit in terms of the skills resource and location of key personnel across the UK. This should see a successful integration and development of both teams,” said Mr Davies.

English Farming & Food Partnerships (EFFP) has advised both boards on the merger from the onset of discussions. “This merger will create an innovative new platform from which long term relationships can be built along the supply chain,” said EFFP chief executive, Siôn Roberts.

The development of Openfield has the support of both companies’ banks (HSBC for Grainfarmers and RBS for Centaur Grain), and is expected to have net shareholders funds of around £20m.