How to build a global market leader in elite cattle breeding
The merger that turned a Dutch cattle breeder into a global market leader
After a merger in the US, the Netherlands based company Koepon and CRI have become URUS, a world leader in cattle genetics. “It turned out to be a success because we gained the trust of both parties.”The family run business from Groningen got together with the US cooperative CRI – unseen before at this scale. Modern livestock farming has to place the right bets. It’s a necessity: if we want to provide the world’s population with sufficient meat and milk in a sustainable manner, farmers will have to keep top-quality cattle. Companies like URUS are making an important contribution to this. “In the livestock sector, breeding is an important mechanism that can contribute to reducing the impact on the environment and improving food safety,” explains Elke Maas, Team Head Food & Agri at Rabobank Wholesale.
RABOBANK ON THE URUS MERGER:
ConsolidationKoepon Holding, the cow breeding company from Feerwerd, Groningen, supplies cow genetics. To be more precise: semen. It selects the best cows worldwide and breeds bulls, which through artificial insemination from millions of ‘straws’ a year ensure healthy offspring with the best milk and meat yield. Koepon was already big in the US, Europe, South America, China and Russia, but also wants to be market leader in a sector that is undergoing consolidation. “In the genetics world, the bar is continuously being set higher,” Cees Hartmans, CEO at URUS, explains. “DNA markers keep providing new possibilities and a far-reaching specialization of breeding companies requires ever-increasing investments in technology and genetics, but especially in what you could call the elite cows of the future. And all that calls for increase of scale.” This was found in the American Cooperative Resources International (CRI) from Wisconsin. The new combination was officially formed in October 2018 and has a combined turnover of more than 300 million euros, 2,000 employees and has an annual volume of about 30 million straws. This makes URUS, as the merger product has been called, a world market leader by far.
“In the genetics world, the bar is continuously being set higher”– Cees Hartmans, URUS
ConfidenceThe merger has had a long run as a result of its complex and unique character. After all, how to get 16,000 members of an American cooperative enthusiastic about a family business from Feerwerd? Anders Rasmussen and Teus Jan van Ekeren, as M&A experts at Rabobank, for more than a year on a nearly daily basis were in touch with the US and Feerwerd about the merger of the two livestock companies: “CRI’s board agreed on the basic principles fairly smoothly. The relationship between the managements of both partners was good. Their mutual trust in us was fairly strong, so that we, as advisors, were able to facilitate the process.”
Cooperative backgroundFormer Koepon has a 70% stake in the new holding company URUS, the cooperative members of CRI hold the other shares. Following the ‘two-brand strategy’ of the holding company, the subsidiaries will continue to serve the global market under their own names. Koepon’s Alta Genetics focuses on commercial medium-sized and large farms, while CRI’s Genex does the same, but because of its cooperative character engages its own target group of smaller to very large companies. In addition, URUS’ subsidiaries VAS and AgSource are active in herd management and information services for dairy farmers. The merger proposal was presented in a roadshow to the representatives of the cooperative members of CRI, Genex and AgSource, who agreed with it by a large majority. Apart from the extensive decision making, also the many legal aspects of the integration made the merger a very complex one. The merger was preceded by a cooperative restructuring of CRI and the demerger and divestment of several smaller activities. Rasmussen: “As far as we know, a merger of this size between a cooperative and a private company has to this day never been seen. As a bank, we have gone much further in this transaction than in regular deals. It was experimenting with a new situation, a true voyage of discovery. It certainly helped that as a bank we also have a cooperative background. We have access to colleagues with special knowledge, whom we have spoken to many times.”
800 pages of contractsAll the legal, tax and business craftsmanship in the summer of 2018 resulted in a stack of contracts totaling 800 pages and several individual transactions. In addition, the group’s refinancing, provided by Rabobank Capital Markets, was also arranged. Finally, October 2018, almost a year and a half after the first exploratory talks, URUS began its existence from a new head office in Madison, Wisconsin. “A new organization has been forged in an industry that is forced to consolidate. We have created a world leader, securing employment for many families in various countries around the world. We can be proud of that,” says Hartmans, who now leads URUS from Wisconsin. “It was a fascinating and stimulating experience to have worked with the Rabobank team, which was crucial to the completion of this merger.”
Banking for Food“Rabobank has played a leading role in this transaction, which has been greatly appreciated,” says Rasmussen. “The trust both parties gave us made this possible. The joint teams of Rabobank, Koepon and CRI, thanks to its tenacity have ensured a successful result. Rabobank is prepared to go the extra mile because we are in it for the longer term. This really aligns with our Banking for Food strategy.” His colleague Maas adds: “In fact, the challenge in this respect is very simple: to provide more and safe food, with less impact. To achieve this, production systems need to become smarter and more sustainable. Because these two companies combine their building blocks and build on them, a very good basis is created to further increase the impact.” URUS can now operate from a very strong foothold in its market. As a global market leader, the company is better placed than ever to produce healthy, productive top cattle that will continue to ensure the food supply of a growing world population, thanks to the best possible genetics.
“A very good basis is created to further increase the impact”– Elke Maas, Rabobank