Archer Daniels Midland, answering a question over its intentions
towards GrainCorp, highlighted its firepower for further acquisitions even
after sealing the $3.1bn purchase of flavourings and ingredients group Wild
ADM's acquisition of Wild Flavors, unveiled on Monday, is
one of the agricultural commodity giant's biggest takeovers, dwarfing even than
the group's – failed - purchase last year of Australian grain handler
GrainCorp agreed a Aus$2.8bn ($2.55bn) takeover by ADM last
year, but the deal was scuppered by Australia's government, which objected on grounds
that the tie-up, at the time, risked undermining the growth of competition in
the country's grain handling industry.
Ray Young, the ADM chief financial officer, on Monday told
investors said that the group retained the "financial flexibility to engage in other
strategic alternatives" even after swallowing German-based Wild Flavors.
'A lot of cash'
Michael Piken, analyst at Cleveland Research Company, asked ADM
representatives at a conference fall what the Wild Flacors deal means "for
maybe some of the other growth initiatives you've discussed, specifically,
essentially [if the] Graincorp opportunity became available again".
Mr Young said that ADM retained a "very strong" balance
sheet after Monday's purchase, which was expected to leave its credit rating unchanged.
Besides itself generating "a lot of cash", ADM, one of the
big four ag commodity traders with Bunge, Cargill and Louis Dreyfus, is set for
a windfall from lower crop prices, which mean that inventories tie up less
"We expect that the low commodity price environment to
continue, which from a working capital perspective is actually very, very favourable
from our perspective," Mr Young said.
ADM has also cut by $300m, to $900m, its target for capital
expenditure this year.
Furthermore, with ADM engaged in a portfolio shake-up which
could see the disposal of some assets, such as the chocolate business, sales
which could "also generate cash flows", the group retained elbow room for deals.
"I guess bottom line is we feel that we've got continued
financial flexibility to engage in other strategic alternatives even post this
While Mr Young failed to mention GrainCorp, ADM, which owns
20% of the grain handler, has retained a keen interest in links with the group.
Patricia Woertz, the ADM chief executive, said two months
ago that the group's strategic interest in Australia, as a gateway for crop
exports to Asia, "remains the same", and that it would, after GrainCorp fills
its vacancy for a chief executive, "have the opportunity to work more closely…
to find additional ways to work together and drive value".