Changing Acquisition Strategy

By Capital Markets

07/12/2016

There are few sizeable M&A deals that are able to reach the stage of completion without the interruption of unforeseen external factors. As we know, the world of acquisitions is rarely predictable. In the case of Johnston Ports and Johnston Grains, the decision to take the two successful, yet distinct operations to market with Generational Capital Markets (GCM, part of the Generational Group) as one entity was made by the Meibergen family, which had operated Johnston Enterprises for five generations. The initial intention was to align the entire operation and sell to a single buyer, however, GCM were able to identify a unique opportunity to split the two previously family-owned assets, a grain elevator and trading business, and an Arkansas River ports operation. This change of strategy arose when the variance in value held for either business by potential buyers became inconsistent and to ensure the sale achieved the preliminary pricing target set by GCM and subsequently met the expectations of the family.

This was an unusual state of affairs of GCM president Brenen Hofstadter, having never before split a company for sale, and responsible for making sure that each of the Meibergen family’s respective entities sold to the most fitting suitor. The Johnston’s port business, JP33, was the first to sell, with the acquisition made by Bruce Oakley, Inc., a bulk commodity sales and transportation company located in Arkansas. As this company was already well known to the Meibergen family, along with GCM, both parties agreed that this company was the right fit, with Oakley respective of the family’s wishes and in agreement that the current management would remain in place.

During the process of due diligence, the latter stage of the two-part sale was beginning to be set in motion. While the Johnston grain elevator business is a regional leader within the agribusiness industry, market trends strongly suggested that in order to succeed in the long term, global relationships would need to be formed. After a flurry of overseas interest in the grain commodity, it became clear that the sale of this piece of the company would perhaps have to include non-regional buyers. GCM and the Meibergen family were keen to explore opportunities outside of the U.S that would help build these connections and gain this side of the business access to the banking resources it needed to thrive. Discussions took place with a company called CGB Enterprises and the relationship soon prospered. Having owned 74 Midwest grain elevators, CGB was well positioned for the takeover and boasted strong links with a global corporation. Despite being based in New Orleans, the company is actually owned in partnership by two Japanese conglomerates, Zen Noh and Itochu; between them the agribusiness giants generate $200 billion of revenue per annum. With the sale consummated, the existing Johnston CEO and President continued to operate the grain business, meaning that the both companies sold under the terms laid out by GCM and the Meibergen family and at the right price.

At GCM, when we take a client company to market we always want to exhaust the marketplace and find the best strategic and private equity group potential buyers for our sellers – both international and domestic. Find out more about this groundbreaking acquisition strategy case study.