Case Studies | Purina Mills
Purina Mills
St. Louis, Missouri
The U.S. market leader in developing, manufacturing, and
marketing commercial animal nutrition products for dairy cattle, beef
cattle, hogs, and horses.
| Investment date: | September 1993 |
| Transaction value: | $413 million |
| Sterling team: | Billy Oehmig, Frank Hevrdejs, John Hawkins |
Background
Purina Mills had a long history as the leading U.S. provider of animal feeds.
In the 1980s, it had been acquired by British Petroleum as part of a
conglomeration strategy. In the years prior to Sterling's purchase, the
company saw significant degradation in its brand strength, dealer
network, revenues, and profitability.
Sterling Impact
The immediate implementation of an equity ownership plan that included substantial
stock ownership by management, plus a company-wide ESOP, helped re-establish the
famed Purina Mills "checkerboard" culture.
After aligning the interests of Sterling and management, we collectively
focused on the strategy of strengthening the brand and the dealer network,
growing revenue, and improving profitability. This led to the following initiatives:
- Creating a captive finance company to allow loyal dealers access to capital
- Making two strategic acquisitions and thus expanding the company's operating base
- Expanding several product lines, leading to over 40% of revenue coming from new, higher-margin products
Outcome
After five years of ownership, Purina Mills was significantly stronger and
more profitable. The company was sold to Koch Industries for a 5.4x return on investment.
| Revenue growth | $200 million |
| Gross margin improvement | 4.6% |
| EBITDA improvement | 20% |
| Add-on acquisitions | 2 |
| Sterling return on investment | 5.4x |