Ecom, the soft commodities trading house, gained approval
from European regulators for its purchase of Armajaro Trading, clearing the way
for the creation of what anti-trust officials termed "one of the largest cocoa
The European Commission acknowledged the takeover of Armajaro
Trading, put up for sale after running into financial difficulty, would create
a cocoa trader "with a significant market position in [cocoa] beans grown in
West Africa", a region responsible for well over half world production.
The operation will create one of the largest cocoa beans
traders worldwide, with a significant market position for beans grown in West
Africa, in particular for non-standard (traceable and/or certified) beans, a
fast-growing market trend
Indeed, the tie-up "will create one of the largest cocoa
beans traders worldwide", commission competition officials said, citing in particular
the position the merged group will have in sales of traceable or certified West
African beans, "a fast-growing market trend".
However, the commission waved through the deal after
deciding that the enlarged group "will continue to face sufficiently strong
competition after the merger" - in cocoa from Archer Daniels Midland, Barry
Callebaut, the three top processors of the bean.
In the market for traceable cocoa beans, which are gaining
in popularity with the broader consumer demand for information on the origin of
their food, there had also been "several competitors" entering the European
In coffee - a market in which Ecom claims already a top
three position in trading, besides being "one of the largest coffee millers in
the world" too – commission officials also found that the Armajaro Trading deal
"was unlikely to lead to less competition or higher prices for the procurement
and supply of green coffee beans".
"Indeed, customers will have sufficient alternative
suppliers, both for standard and for [traceable/certified] coffee beans of
different origins and qualities."
The decision comes six months after Ecom, headquartered in
Switzerland, agreed a deal with UK-based Armajaro Trading, one of the many
commodity businesses to run into the buffers in 2013, which witnessed sharp retreats
in prices of many crops.
Among commodity funds, Clive Capital, which had $5bn under management at its peak,
closed in the autumn, with Arbalet Capital and Higgs Capital Management - set
up in July 2012, and had an estimated $340m in assets under management at its
peak – also quitting.
Ecom, which traces its history back more than 150 years,
ranks in the top five merchants in cocoa, and in cotton, even before buying
Armajaro Trading, handling 250,000 tonnes of the chocolate raw material and 2m
bales of cotton, besides 11m bags of coffee in 2011.
It also has a presence in the sugar, oilseed and hog sectors.
For 2011, the latest one for which data are available, the
trader claims revenues of more than $4bn.
However, Ecom has acknowledged a "limited or developing
presence" in areas such as East African coffee, Ghanaian cocoa and cocoa contracts
with major customers – voids is sees the Armajaro Trading acquisition helping
to fill, according to European Commission documentation.
"Armajaro Trading has good customer relationships with major
players in the coffee and cocoa commodity sectors, especially cocoa.
"Ecom hopes particularly to gain from Armajaro Trading's long-standing
working relationships with these cocoa customers."
The deal will help Ecom to "procure better products, helping
farmers to have a higher income while passing on lower costs derived from good
practices and efficiencies to manufacturers", the documentation says.