Ridley Corporation Ltd.

Level 10, 12 Castlereagh Street
Sydney
New South Wales 2000
Australia
Telephone: (+61) 02 82776100
Fax: (+61) 02 82276000
Web site: http://www.ridley.com

Public Company
Incorporated: 1987
Employees: 2,299
Sales: A$1.41 billion ($752.9 million) (2002)
Stock Exchanges: Australian
Ticker Symbol: RCL
NAIC: 311111 Dog and Cat Food Manufacturing; 212393 Other Chemical and Fertilizer Mineral Mining; 311119 Other Animal Food Manufacturing; 325998 All Other Miscellaneous Chemical Product Manufacturing; 424910 Farm Supplies Merchant Wholesalers; 541710 Research and Development in the Physical Sciences and Engineering Sciences

Ridley Corporation Ltd. is Australia's leading manufacturer of salt and related products and animal feeds. Moreover, with its growing North American holdings, the company has claimed a place as one of the world's leading animal feeds producers. Ridley conducts its salt production operations through Cheetham Salt, the single-largest producer of food-grade salt in Australia. Cheetham Salt distributes its salt products throughout Australia, Southeast Asian, and Asian Pacific regions. Ridley also holds a 50 percent stake in Dominion Salt, based in New Zealand, one of that country's major salt producers. Yet animal feed is clearly the fuel for Ridley's growth. In Australia, the company operates in this sector under subsidiary Ridley Agri-products, producing a large variety of feed products for the country's livestock, as well as fish feeds and pet foods. In addition, Ridley develops and produces related animal health products, such as medications, disinfectants, and insecticides. In North America, the company operates through its 70 percent holding in Canada-based Ridley Inc.—the remainder of that company's stock is listed on the Toronto Stock Exchange. Ridley Inc. operates through three primary divisions: Feed-Rite, based in Winnipeg, Manitoba, with 15 production plants; Hubbard Feeds, in the United States, with 26 production facilities; Ridley Block Operations; and Cotswold Swine Genetics, which produces genetically advanced pigs. Ridley Corporation is itself listed on the Australian Stock Exchange and is led by CEO Matthew Bickford-Smith.

From Salt to Feed in the 1990s

Ridley Corporation was founded in Australia in 1987 as a processor of bulk salt. A public company from the start, with a listing on the Australian Stock Exchange, Ridley quickly began expanding its salt operations, developing its own salt washing and refining facilities. By 1988, the company had launched the production of a complete line of washed and refined salt products for both the consumer and industrial foods markets. The company's success in this area led it to diversify.

By 1990, however, Ridley had decided to reorient itself as a specialty producer in two primary markets: salt and animal feed. Over the next year, the company sold off its non-core holdings and began developing a growth-through-acquisition strategy that was to last through much of the 1990s.

The company's first move into its new target sector came with the purchase of the feed operations of Goodman Fielder Wattie Limited, then in the midst of a drive to transform itself into a global prepared foods giant. That purchase brought Ridley several noted names in the Australian feedstock industry, including Barastoc, which was founded in 1938 and introduced the steamed pelleting process to the Australian market.

In 1987, Barastoc had joined the Goodman Fielder group, created in 1986 through a merger between New Zealand's Goodman and Australia's Fielder Gillepsie Davis, shortly joined by Australia's Allied Mills. Barastoc was merged into the Fielder and Allied Mills feed divisions. Two years later, that division grew again when Goodman Fielder purchased South Australia-based Milling Industries.

The acquisition of Goodman Fielder's feed business formed the basis of a new Ridley subsidiary, Ridley Agriproducts. The company next seized the opportunity to expand both of its core businesses when, in 1992, it purchased National Foods Limited Group's salt refinery, Cheetham Salt, the country's largest salt products brand, and its feedstock division, Cheetham Rural.

Ridley continued to build up its leadership position in both of its core Australian markets into the middle of the 1990s, notably with the acquisition of Aquafeed Products Australia. That purchase enabled the company to enter the fast-growing aquaculture market. In 1996, Ridley added to its dominant position in the region's salt market with the purchase of 50 percent of New Zealand's Dominion Salt.

By then, Ridley had already begun casting its eye on international expansion, especially an entry into the large North American market. The company's chance came in 1994, when it paid A$25 million to purchase Canada's Feed-Rite, which was founded in Winnipeg, Manitoba, in 1939 and had grown into one of the western Canada region's largest animal feed producers.

North American Expansion in the 1990s

The highly fragmented North American feed market remained the target of Ridley's acquisition drive through the mid-1990s. In 1995, the company purchased Lacombe, Alberta's Quality Feeds Alberta Ltd. Also in that year, the company added a breeding component when it acquired the exclusive rights to produce Cotswold genetically bred pigs in Canada.

In 1996, the company began to extend its Canadian operations nationwide, acquiring southern Ontario-based premix producer Fairmix. The company also strengthened its western Canadian base through the acquisition of the Green Valley Feed Service, which operated a feed mill as well as its own farm supply store. Not all of the company's expansion efforts met with success, however. In mid-1996, the company failed in its takeover attempt of Melbourne, Australia-based Joe White Maltings.

Instead, the company returned its focus to North America. In August 1996, Ridley made its first move into the U.S. market, acquiring, through Feed-Rite, Zip Feed Mills, which operated three integrated feed production plants in North and South Dakota. The move increased the company's North American production by 80,000 tons per year, with total production capacity of up to 150,000 tons per year. As then CEO Gary Busenhut told The Advertiser: "The acquisition of Zip Feeds will give Feed-Rite a strong presence in markets which are much larger than our traditional markets."

The purchase also whetted the company's desire for further expansion in North America, leading to its next major acquisition, of Hubbard Milling, in April 1997. For a price of $65 million, Ridley added 15 new production plants, more than doubling its North American production capacity to a total of more than one million tons annually, making the company a significant player in the North American market. The Hubbard acquisition also established Ridley as the leading producer of low-moisture supplement feed blocks in North America.

Following the Hubbard purchase, again made through Feed-Rite, Ridley renamed its Canadian operation as Ridley Canada. Hubbard itself was renamed as Hubbard Feeds, Inc., and absorbed the company's Zip Feed mills. Ridley Canada soon after added another acquisition, of Daco Laboratories, which produced concentrated nutritional base products. That purchase enabled the company to broaden its product range as well as extend its geographic reach. It also led Ridley Corporation to list its Canadian subsidiary on the Toronto Stock Exchange, selling a 40 percent stake and changing its name to Ridley Inc. Ridley Corporation later raised its shareholding in Ridley Inc. to 70 percent.

In the meantime, Ridley had not neglected its Australian business. In 1997, the company expanded by buying up six feed mills and a premix plant from Farmstock Stockfeed, strengthening its position in Queensland. Following that purchase, the company acquired Moloney's Stockfeed and Maffra Stockfeed, boosting its capacity in Australia's Western Districts.

Global Feed Producer for the 2000s

Ridley once again turned its attention to building up its North American holdings in 1998. In that year, the company acquired PM Ag Products, paying A$10 million to acquire that company's U.S.-based low-moisture feed block business. Also in 1998, the company bought up Iowa City, Iowa-based Gringer Feed and Grain Inc., which produced both concentrates and complete feed products. Further north, the company added to its Canadian base through the acquisition of Macleod Feed Mill, based in Alberta. At the same time, the company made its first move into Europe through its acquisition of Cotswold Pig Development Company Ltd. in the United Kingdom.

The economic collapse of much of the Asian Pacific region, combined with a soft market in its core Australian market, cut into Ridley's growth in the late 1990s. By 1999, Ridley was forced to restructure, shutting four of its production plants in Australia and centralizing the management of its remaining plants. At the same time, shrinking pork prices were hurting the company's Cotsworld subsidiary as well.

That operation was hit still harder in 2001, when an outbreak of foot-and-mouth disease in the United Kingdom brought about a freeze of the company's breeding stock and pig sperm exports into the company's main French and German market. The outbreak of the disease also had a negative impact on customer confidence in farther-flung markets, including Japan and the United States. By 2002, Ridley was forced to sell off the money-losing European Cotswold operations, keeping only its North American division, which was renamed Cotswold Swine Genetics.

Company Perspectives:

Corporate Principles: To be a high quality, low cost producer in chosen markets; to foster long-lasting customer relationships by maintaining high standards of product quality, customer service, and technological development; to provide a safe and rewarding working environment for all employees; to generate above average returns to shareholders.

Nevertheless, Ridley had not entirely abandoned external growth throughout this period. In 2000, the company achieved a significant advance in its U.S. position through the purchase of the Wayne Feeds Division from the American firm the ContiGroup. That operation, based in Chicago, expanded the company's feed production capacity and also gave it a solid base in such new market territories as Pennsylvania, Illinois, Kentucky, and North Carolina.

North America by then represented the largest share of the company's revenues, which topped A$1.4 billion in 2002. The region remained Ridley's growth market into the 2000s. In 2002, the company struck out in a new direction, aiming to develop a new business focused on the equine market. As the foundation of that business, the company made a new acquisition, of McCauley Bros., in April 2002. McCauley Bros. specialized in horse feeds and related nutritional products.

By the early 2000s, Ridley had grown into one of the world's major feeds producers, with an especially strong position in the North American market. The company showed no signs of loosening its growth-through-acquisition commitment, announcing in mid-2003 its intention to pursue a number of new, smaller acquisitions, particularly in North America. As new CEO Matthew Bickford-Smith told The Australian Financial Review, "That's very much our preferred approach right now, basically gradual, bite-sized acquisitions in high value-added animal protein products, tending to be in the supplementary side." At the same time, Ridley reaffirmed its commitment to its salt division, announcing plans to expand its Cheetham Salt unit through a series of acquisitions and partnerships.

Principal Subsidiaries

Barastoc Stockfeeds Pty Ltd.; Cheetham Salt Ltd.; Cotswold Canada Ltd. (70%); Farmstock Pty Ltd.; Feed-Rite, Inc. (United States; 70%); Hubbard Feeds Inc. (United States; 70%); Ridley AgriProducts (NZ) Pty Ltd.; Dominion Salt Ltd. (New Zealand); Ridley AgriProducts Pty Ltd.; Ridley Argentina S.A.; Ridley Inc. (Canada; 70%); Wishbone Turkey Farm Ltd (Canada; 70%).

Principal Competitors

Cargill Inc.; Archer Daniels Midland Company; ConAgra Foods Inc.; Edison SpA; Eli Lilly and Company; President Enterprises Corporation; Land O'Lakes Inc.; Royal Cebeco Group Cooperative; Nutreco Holding N.V.

Key Dates:

1987:: The company incorporates as a bulk salt processor and is listed on the Australian Stock Exchange.
1988:: Expansion into salt washing and refining commences.
1990:: A new strategy focusing on salt and animal feed markets is adopted.
1994:: The company acquires Feed-Rite of Canada in its first international expansion.
1997:: Hubbard Milling in the United States is acquired; Ridley Canada is listed on the Toronto Stock Exchange.
2002:: The company acquires U.S. equine feed and nutrition specialist McCauley Bros.
2003:: Plans are announced to begin a new series of small-scale acquisitions in the United States as well as expansion of its salt business in Australia.

Ridley Corporation Ltd

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