Graincorp and Cargill Australia will sell their joint venture business Allied Mills to Pacific Equity Partners (PEP) in a deal valuing the business at $455 million, including net debt and inventory of $125 million.

GrainCorp will receive $190 million for its 60pc of the business from the sale while Cargill will receive $127 million for its 40pc, while a shareholder loan of $13 million accounts for the rest of the sale price.

It marks the end of an era for GrainCorp in particular.

The purchase of Allied Mills with Cargill Australia’s predecessor AWB in 2002 from Goodman Fielder marked the start of GrainCorp’s diversification strategy away from its historical storage and handling (S&H) business.

Today GrainCorp generates a far smaller percentage of its total earnings from its S&H business, with investments in the malting and edible oils industries key components of the business.

GrainCorp managing director Mark Palmquist said the decision was made to free up space in GrainCorp’s balance sheet.

He said Allied Mills had been a solid contributor over the years but added profits had been disappointing in recent years, particularly in comparison to GrainCorp’s other new income streams, such as malt and oil.

“The potential is there, but it really needs some additional investment,” he said.

“I think PEP, with its investments in other food manufacturers such as the Pinnacle Bakery and Patties Foods, has a natural advantage with Allied Mills, there could be some good synergies created between the three businesses.”

Officials from PEP declined to comment about the future direction of Allied Mills saying the sale was yet to be completed, however in a statement, PEP managing director Tony Duthie said Allied Mills was a good fit for his company.

"This is rare combination of complementary businesses operating in truly adjacent categories," he said.

Allied Mills managing director Joe Di Leo said the two companies would complement each other.

“Allied Mills has built a reputation for innovative food solutions tailored to the changing needs of our customers,” he said.

“Our combination with Pinnacle will offer customers a one-stop-shop across bread and sweet bakery products.

“With PEP committed to investing in the combined company’s strategic assets, there is very solid growth potential.”

Allied Mills is a major player in the Australian milling and food manufacturing space, purchasing 800,000 tonnes of grain annually.

It is Australia’s leading manufacturer of flour, bakery premixes and specialty frozen par-baked bread products.

The business model has been transformed in GrainCorp and Cargill’s time at the helm, evolving from a business dominated by flour milling to one with a strong food manufacturing presence.

The company employs 850 people across all the mainland states and in New Zealand.

Mr Palmquist said GrainCorp would now be actively pursuing new opportunities with the funds.

He did not specify particular business categories or geographies the company would target.

“We will look at our options as they come up,” he said.

Cargill Australia spokesman Peter McBride said while the business had been a very satisfied shareholder of Allied Mills, it no longer felt Allied Mills was a fit for Cargill Australia’s existing grain, oilseed and supply chain businesses.

“The strategic direction of Allied Mills is adjusting to changing market conditions and we felt it was no longer a fit for us,” he said.

The sale is subject to regulatory approvals, such as the all-clear from the Australian Competition and Consumer Commission (ACCC).