ConAgra will merge its ConAgra Mills unit with CHS and Cargill's joint venture Horizon Milling in order to create the new flour milling company, serving the baking and food industries. The formation of Ardent Mills is expected to be completed late this year, pending regulatory clearance and financing, the companies said.

As part of the transaction, each of the JV partners will contribute their milling operations on a cash-free, debt-free basis in exchange for ownership stakes.

Omaha-based ConAgra and Minneapolis-based Cargill will each own a 44% stake in Ardent Mills, while St. Paul, Minn.-based CHS will hold a 12% stake. Each of the stakeholders will have representatives on the JV's board of directors and will extract cash distributions totaling $800 million to $1 billion.

The portion of the cash distributions ConAgra will receive will be used to pay down debt accumulated by its $6.8 billion acquisition of Ralcorp Holdings Inc., said company spokeswoman Becky Niiya. ConAgra was able to line up nearly $5.5 billion in debt financing for its acquisition of the St. Louis-based private-label food manufacturer. According to sources who talked about the deal on prior occasions, ConAgra plans to spend about 18 months delevering before doing any more mergers and acquisitions.

Because the Ardent participants' distributions will be based on their stakes, according to Niiya, ConAgra is expected to realize cash distributions from $352 million up to $440 million.

Those cash distributions will be funded, as will working capital, with debt financing that will be provided upon Ardent Mills' formation.

Horizon Mills was formed by Cargill and CHS in 2002. Its president, Dan Dye, will be the new chief executive of Ardent Mills, while Bill Stoufer, president of ConAgra Mills, will become chief operating officer and chief integration officer.

Ardent Mills will have 44 flour mills, three bakery mix facilities and a specialty bakery, located in the U.S., Canada and Puerto Rico, with its headquarters to be determined at a later date.

Sales for ConAgra Mills were $1.8 billion for the fiscal year ended May 27, while Horizon Milling's sales were $2.5 billion for its fiscal year ended May 31. With a total of $4.3 billion in revenue, Ardent Mills will be self-financed through cash flow, bank debt and a credit facility, according to the statement announcing the deal. The amount of debt and its structure will be determined during the JV's pre-closing period.

ConAgra CEO Gary Rodkin said in a statement: "Ardent Mills will set the new industry standard by addressing the most important issues facing customers, such as commodity price volatility, increasingly sophisticated food safety requirements, the need for more cost-effective supply chains and growing market demand for more innovation in products and processes."

"As part of Ardent Mills, CHS farmer-owners will have more opportunity to further connect the wheat they produce to the consumer marketplace," CHS executive vice president and chief operating officer Mark Palmquist said in a statement. He added that CHS, being owned by farmers, ranchers and cooperatives, will be among Ardent's wheat suppliers.

Among services offered by Ardent Mills will be product development resources, technical and application support, supply chain management and commodity price risk management, while tapping the expertise of its owners in the areas of transportation logistics, consumer insights, food ingredients and culinary knowledge, as well as knowledge of the markets.

A Jones Day team consisting of Peter Izanec, Dan Hagen, Tom Goots, Tom Hamilton, Will Herzberger and Kathy Fenton provided ConAgra with legal advice.