MINNEAPOLIS — For many companies, acquisitions and new plant investments are a matter of “if.” For agribusiness giant Cargill Inc., it’s a matter of where and when.
Just over the past nine months, the company has unveiled more than $1.5 billion worth of transactions, ranging from the $800 million buyout of an Australian grain-trading operation to a $30 million investment in a new plant in Russia that will churn out Chicken McNuggets for McDonald’s.
As it scouts the world for its best business opportunities, Cargill is concentrating on areas where growth is heating up fastest — often in distant countries like Brazil and Indonesia.
It has money to spend. Over the past decade, the Minnetonka, Minn.-based company has doubled in size, producing a cornucopia of foods and commodities, from beef and barley malt to sugar and salt. A recent decision to divest its 64 percent stake in Plymouth, Minn.- based fertilizer maker Mosaic Co. will give it more financial firepower to extend its reach.
A major goal of the $20 billion- plus deal was to allow Cargill to cash out one of its largest shareholders — the late Margaret Cargill — to fulfill her philanthropic goals. But the divestiture will also enable Cargill to extinguish a hefty $8 billion-plus in corporate debt. That will bolster its financial flexibility and give it more capacity for acquisitions and investments.
“Companies with strong balance sheets have more choices,” Cargill chief executive Greg Page said in a recent interview with the Star Tribune of Minneapolis.
Page, 59, has been Cargill’s chief executive since spring 2007, steering the company through the worst economic downturn since the Great Depression, staying profitable and keeping the Cargill and MacMillan families happy.
Those families own about 90 percent of the company, and they let it reinvest most of its profits in growth. Page, a 37-year Cargill veteran, described the dividends they receive as “modest.”
Indeed, Cargill’s dividend payouts in 2008 and 2007 were, respectively, 10.3 percent and 14.9 percent of profits, regulatory filings show. The average dividend payout rate among companies in the Standard & Poor’s 500 stock index has averaged 43 percent over the past decade.
“A lot of factors go into (our) growth story,” Page said. “But the foundational one is the families’ willingness to leave the overwhelming majority of our cash flow in the company.”
Page presides over a company with more than $100 billion in annual sales, more than any other company in Minnesota. It employs 131,000 people in an empire that spans 66 countries. Page estimates that he spends 90 to 100 days a year on the road tending to Cargill matters, mostly overseas. His itinerary over the past year has included India, Ukraine, Poland, Romania, China, Japan and Malaysia.
The company’s business has grown ever more complex, evolving away from pure commodities and going deeper into the food chain in the process. About 25 years ago, a Cargill beef plant in the United States might cut and grind cattle into 25 different products. Today, Page said, that number would be around 700.
Cargill still sells railroad tank cars full of vegetable oil to packaged- food companies, as it has for decades, but it also turns vegetable oil into sachets of sauce for restaurants.
