Land O’Lakes, Inc. has signed a letter of intent to acquire Southern States Cooperative Inc.’s animal feed business.

The letter follows the announcement earlier this year that Southern States had entered into a supply agreement with Land O’Lakes through its WinField United crop inputs and insights unit.

The intent of entering into discussions with Land O’Lakes is not to get out the feed business, but rather, Southern States said, to get out of the feed manufacturing business.

A combination of the feed businesses of the two co-ops would strengthens Land O’Lakes’ number two position in the feed industry, with an combined estimated annual tonnage for 2014 of 13,700 million metric tons. The number one player in the market would remain Cargill Animal Nutrition at an estimated 19,200 mmt.

In total, not including pet food, feed makes up 20% of Southern States overall business. The co-op’s branded pet foods are now manufactured by Pro Pet, and at this time, are not included in the letter of intent signed by Land O’Lakes and Southern States. 

The letter “opens the conversation,” and involves Southern States’ feed manufacturing assets, including its seven feed mills. Southern States’ retail stores are not included.

“This is an excellent opportunity to expand our relationship with Southern States and increase our animal feed business in the eastern U.S.,” said Chris Policinski, president and CEO, Land O’Lakes.

The proposed acquisition reinforces a commitment by both parties to help their customers continue to compete with industry-leading products and services in an era of industry consolidation.

“We are looking forward to engaging with the Southern States members and customers to understand their needs,” said Beth Ford, group executive vice president and chief operating officer, Land O’Lakes. “We plan to provide uninterrupted access to the Southern States-branded products customers trust for their animals, and we will work every day to deliver the quality, innovation and expertise they expect of us.”

“We are pleased with the opportunities this partnership with a fellow cooperative brings to Southern States,” said Jeff Stroburg, president and CEO of Southern States. “Our members will continue to receive the same level of service from our retail locations while benefitting from Land O’Lakes’ feed business, Purina Animal Nutrition and their knowledge and experience in manufacturing the quality feed our customers expect.”

The purchase is expected to be completed in January 2017.

Land O’Lakes is one of America's premier agribusiness and food companies, is a member-owned cooperative with industry-leading operations that span the spectrum from agricultural production to consumer foods. With 2015 annual sales of $13 billion, Land O'Lakes is one of the nation's largest cooperatives, ranking 215 on the Fortune 500. Building on a legacy of more than 95 years of operation, Land O'Lakes today operates some of the most respected brands in agribusiness and food production including LAND O LAKES Dairy Foods, Purina Animal Nutrition and WinField United. The company does business in all 50 states and more than 60 countries. Land O'Lakes corporate headquarters is located in Arden Hills, Minn.

Southern States is a Richmond, Va.-based farm supply and service cooperative, established in 1923, which now has more than 200,000 farmer-members. As one of the nation's largest agricultural cooperatives, it provides a wide range of farm inputs, including fertilizer, seed, livestock feed, pet food, animal health supplies and petroleum products, as well as other items for the farm and home. The cooperative serves its members and non-member customers through 1,200 retail outlets in 23 states.