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Mikkel Pates, Forum News Service, Published September 23 2013

Nationally known brand buys Carrington pasta company for $370 million

CARRINGTON, N.D. - North Dakota’s Dakota Growers Pasta Co., based in Carrington has been sold again – this time to Post Holdings Inc. of St. Louis.

The sale price is $370 million – up 54 percent from the $240 million price tag when Dakota Growers sold to Viterra Inc., in 2010. Viterra is now owned by Swiss commodity trader Glencore Xstrata.

The Post deal was announced Sept. 16 and could go through as soon as January 2014. The purchase includes Dakota Growers’ main plant in Carrington, as well as other facilities in New Hope, Minn. Dakota Growers reportedly has about 450 employees, including a warehouse and shipping depot in Fargo.

Post includes iconic brands such as Honey Bunches of Oats, Grape-Nuts and Shredded Wheat. According to a news release, Dakota Growers is a leader in the $5 billion North American pasta sales market. It is most significant in private label retail, food service and ingredient markets.

Ed Irion, Dakota Growers’ vice president and general manager, says the company will continue to conduct business as usual.

“What Post has told us is that we will continue to operate quite independently from them,” he says.

“I am delighted to welcome Ed, his team, and the Dakota Growers associates into the growing family of Post Holdings’ companies,” says William P. Stiritz, Post’s chairman and CEO. Post expects to expand its portfolio “into segments of the overall food industry where it sees opportunities to grow and diversify its strong cash flow,” he says.

The deal

As described in the release, the deal would be $370 million in cash to be paid at closing “on a cash-free, debt-free basis, subject to a working capital adjustment.” The acquisition will be funded by a combination of cash on-hand and up to $200 million in financing.

The release also says that over a full year, the transaction is expected to contribute approximately $300 million to net sales and approximately $42 million to $46 million in earnings.

A good fit

Dakota Growers makes dry pasta and semolina flour and byproducts. It purchases durum wheat and spring wheat. The company started in 1990, initially as a farmer-owned cooperative. It was converted to a corporate firm in 2002, ostensibly to add “liquidity” to shareholders. The founding and only chairman of the board of the company for the co-op and independent corporation was Jack Dalrymple, a Republican state legislator starting in 1985.

Dalrymple became North Dakota’s lieutenant governor in 2000 and became governor in December 2010, after then-Gov. John Hoeven was elected to the U.S. Senate. Dalrymple was then elected as governor in 2012.

Tim Dodd, who lives in Ottertail, Minn., was president of the company from 1992 until it was sold in May 2010. He stayed with Viterra through 2011 and stayed on in a support role through December 2012.

Dodd says the deal is a “very good price” in today’s markets. “I’m excited for the management team and employees,” Dodd says. “I think Post would be a great company to work for, a good fit.”

Dodd says there’s been more opportunity in pasta since the 2010 sale of the company, especially in the so-called “healthy pasta” category. He says the food industry has “overcome the stigma of the Atkins Diet,” which emphasized reducing carbohydrates in the diet, including pasta, for weight loss. The company launched the Dreamfields brand of reduced carbohydrate pasta, which it still produces today.

Doug Opland of Des Lacs, N.D., president of the U.S. Durum Growers Association, said he isn’t sure what the ownership change means for farmers. U.S. Durum Growers has only about 320 members, most in North Dakota and Montana, Opland says, noting that production is moving to the west.

When Viterra took over from then-independent Dakota Growers Pasta, things seemed to change for the farmer, Opland says.

“They weren’t as farmer friendly, I don’t think,” Opland says. “I used to deal quite a bit with Dakota Growers, but only filled out my contract after Viterra took over, and haven’t done business with them.”

Opland says Viterra seems to prefer railcars to farmer-owned semi-trailers. After the change, he would talk to buyers in Minneapolis, rather than those in Carrington, about grain purchases.