Olam International Ltd has acquired Archer Daniels Midland Co’s (ADM) cocoa business for $1.3 billion, in line with its strategy to prioritise cocoa as one of the platforms for accelerated investment and growth.
According to its 2014 annual report, cocoa was one of the six platforms, which have been prioritised by the commodities merchant. Through the acquisition, the company seems to be taking the next step whereby it plans to build on its existing core business; both with greenfield manufacturing facilities or acquisition of suitable and complementary assets.
The acquisition will place the Singapore-based Olam among the top tier of the niche bean processing industry, news wires noted.
With the acquisition, Olam is bringing into its stable, one of the world’s largest processors and suppliers of cocoa liquor, powder and butter. ADM has eight factories across Brazil, Canada, Germany, Ghana and Singapore, which will provide a springboard for Olam to expand into new geographic areas and gain a global processing footprint in Europe, North America, South America, Asia and Africa.
In a press statement, Olam said the ADM’s facilities will also increase Olam’s cocoa processing capacity by approximately 600,000 MT through the acquisition of the eight processing facilities.
Company executives said that together with its existing integrated cocoa business, Olam’s new cocoa operations will make up 16 per cent of the world’s total cocoa processing capacity and source over 20 per cent of the total bean output. The agribusiness will compete with industry leaders Barry Callebaut AG and Cargill Inc.
“With the acquisition of the established “deZaan®” brand, over 2,150 established blue chip customers and access to both emerging and developed markets, Olam will benefit from acquiring a leading supplier of cocoa powders with over 30 prime powder types, unique product development capabilities and ability for customisation,” it said.
Separately, ADM has commented that the sale of its cocoa business will allow it to invest in less volatile businesses and/or distribute the money to shareholders. The company recently sold off its smaller and under-performing chocolate business to Cargill for $440 million.
Earlier this month, Olam bought into leading American peanut sheller, McCleskey Mills Inc at an enterprise value of $176 million.
The company said it currently estimates that the transfer of the ADM’s cocoa business to the group will be completed by the end of its current financial year, ending June 30, 2015. Reuters quoted the company that it is unlikely to make another major acquisition within the financial year.