Archer Daniels Midland underlined its expansion into
higher-value food products with the E2.3bn ($3.1bn) purchase of Wild Flavors, extending
a period of corporate activity by the agricultural commodities giant.
US-based ADM beat rival suitors reported to have included
Japan's Ajinomoto, Swiss-based Givaudan and the UK's Tate & Lyle to
purchase Wild Flavors, which provides flavours for the likes of cereals,
confectionery, ice cream and dairy products.
The purchase comes amid a shake-up in the ingredients
sector, with Germany's Syrmise in April unveiling the E1.3bn purchase of France's
Diana Group, while Agrana on Friday revealed the close of an Austrian fruit
preparations plant, blaming "the continuingly weak development of the market
for fruit yoghurts in Europe".
ADM said that it was upbeat over the ingredients markets
that it will expand into with the purchase Wild Flavors, with chief executive
Patricia Woertz saying that "natural flavour and ingredients is one of the largest
and fastest-growing consumer trends in both developed and emerging markets".
Together, ADM, which already has some ingredients
operations, and Wild Flavors, which is expected to see revenues of about E1bn ($1.4bn)
this year, will boast world sales approaching $2.5bn, with "significant room to
grow", Ms Woertz said.
TheE2.3bn takeover, which includes E100,000 of debt, will "create an unmatched
capability to respond to local consumer preferences and offer complete food
solutions that taste great".
Nonetheless, the combined ingredients operation will, in
sales terms, represent only a relatively small part of ADM, which takes
revenues of some $90bn a year, and with Bunge, Cargill and Louis Dreyfus is one
of the "ABCD" of agriculture trading.
ADM is buying Wild Flavors from Kohlberg Kravis Roberts, the US private equity firm, and Dr Hans-Peter Wild, the son of founder Rudolf Wild.
'Expand and diversify'
ADM has, like some of its rivals, and notably Cargill,
sought to expand into food operations further up the food production process from
commodity crops, in an effort to tap into higher margins, and reduce the impact
on earnings of volatile crop prices.
In the protein industry, US meatpacking giant Tyson Foods is undertaking a similar strategy in buying Hillshire Brands, the maker of Jimmy Dean sausages.
The takeover is "consistent with our long-term strategy to
diversify the crops we process and expand and diversify our product portfolio",
Ms Woertz said.
"It complements the ingredient, organic-growth investments
we've recently made - including our Brazil protein complex and soluble-fibre
expansion in China."
The takeover, while higher priced than figures of around
E1.5bn suggested earlier in the auction, "will meet our return objectives, with
estimated cost and revenue synergies of E100m by year three", she said.
The deal is the latest in a series of corporate actions by
ADM, many of which have, in fact, been aimed more at the basic commodities
In cocoa, ADM is attempting to sell its chocolate business,
while keeping most of its bean processing operations, after failing to secure a
buyer for the whole division.
In grains, the group last month completed for E83m the acquisition
of the remaining 20% it did not own in Toepfer International, the German-based agricultural
commodities trading house.
Last year, ADM failed in the takeover of Australian grain
handler GrainCorp, after the deal was scuppered by Canberra.