Barry Callebaut is to gain top rank among world cocoa
grinders by buying the processing division of Singapore-based Petra Foods for
$950m in cash, also strengthening its foothold in the growing Asian market.
Swiss-based Barry Callebaut, currently the second-biggest
grinder, will add more than 400,000 tonnes in annual processing volumes from the
deal, taking its total nearly to 1.2m tonnes, enough easily to overtake
Cargill, which grinds some 800,000 tonnes of cocoa a year.
Barry Callebaut said that the deal will also boost presence
in the "fast-growing" markets of Asia - where Petra Foods currently ranks as
the top cocoa group, followed by Indonesia's Guan Chong - and Latin America.
Emerging markets currently account for 66% of sales, by volume,
for Petra Foods' cocoa division, which has processing plants in Brazil,
Indonesia, Malaysia, Mexico and Thailand, besides in France and Germany.
The acquisition "significantly adds production capacity in
emerging markets, especially in Asia, which is crucial for Barry Callebaut's
own chocolate business, and for further growing outsourcing and partnership
agreements", Barry Callebaut chief executive Juergen Steinemann said.
One of the group's main business lines is in making
chocolate for labels including Swiss-based Nestle, Anglo-Dutch conglomerate Unilever
and Mexico's Grupo Bimbo.
The deal will see it supply chocolate too to Petra Foods, which
said that it was, after the disposal, to "focus on strengthening and expanding
its branded consumer division", investing in brands and launching new products,
but may distribute some of the proceeds to shareholders.
Mr Steinemman said that the takeover will also allow Barry
Callebaut to diversify its sources of cocoa beans, raising the proportion
bought in Asia and meaning a "reduced dependency" on West Africa.
Some parts of West Africa, the top producing region, have a
history of political instability, including Ivory Coast, which descended into civil
strife last year after presidential elections.
Elections this week in neighbouring Ghana, which elected John
Dramani Mahama as president, have been reported as peaceful, although the
opposition has claimed the vote was rigged.
'Will create value'
Barry Callebaut estimated deal benefits, such as stripping
out duplicated costs, reaching SFr50m-35m a year, if requiring one-off spending
of SFr20m-25m to achieve, including bankers' and legal fees.
"The planned acquisition will create value for all
stakeholders," the group said, while ditching until 2015-16 its long-term guidance
of 6-8% in growth in sales volumes and operating profit.
Barry Callebaut is to raise cash from equity and debt
markets to pay for the takeover, which will also bring some 1,700 employees and
sales offices in the Netherlands, Singapore and the US.
Shares in the group closed down 2.3% at SFr919.00.
Petra Foods, whose stock soared 20% to a record closing high of Sing$3.31 in
Singapore, said that the disposal of its cocoa division represented the "most
attractive" option, compared with making the investment needed to growing the unit
"While all of us at Petra Foods maintain a strong emotional
attachment to our cocoa ingredients division, we believe the sale will allow us
to immediately unlock substantial value in the business," John Chuang, the Petra
Foods chief executive, said.
The cocoa division achieved operating profits equivalent to
SFr44m last year, on revenues from external customers of SFr1.13bn.