One of the World’s Biggest Grain Traders ADM Makes Another Acquisition


October 14, 2014

News organisations reported on Monday that Archer Daniels Midland Co (ADM) is planning to purchase Specialty Commodities Inc. ADM, which is the world’s biggest grain trader, is closing the deal of the health-focused ingredient supplier.


ADM dominates the movements of agricultural commodities around the world. It is part of the ABCD companies together with Bunge Ltd, Cargill Inc. and Louis Dreyfus Corp.


It is reported that the deal would be worth $170 million. The Specialty Commodities Inc. in question is Fargo, which is majority owned by private equity firm Goldner Hawn Johnson & Morrison Inc. Fargo specialises in selling health ingredients to different companies, including many makers of snacks, cereals and nutrition bars. The Specialty Commodities Inc. deals with crops such as legumes and seeds from as far afield as Bolivia and South Africa.


The deal is ADM’s second acquisition of a health-focused ingredient supplier in the previous three months, according to Reuters. Earlier this month ADM acquired Wild Flavors, which is a Swiss-German company for natural ingredients. The deal was worth 2.3 billion euros.


According to the Wall Street Journal, this earlier purchase of Wild Flavors helped move ADM away from the more volatile grain market, as commodity price swings tend to be quite unpredictable. The most recent deal, if it goes through, would help ADM to cement its place on the health-focused food industry further.


Patricia Woertz, Chairman and Chief Executive of ADM, told that the move is part of the company’s aim to “add new product streams to our portfolio to enhance our capabilities to serve our customers as they respond to this demand.”


The deal involving ADM and the Specialty Commodities Inc. would see ADM purchase the whole stake of the company. This would mean Goldner Hawn Johnson & Morrison would finally sell its stake of the company. The private equity company acquired the majority shares of the Specialty Commodities Inc. in 2008.


The focus on health-focused companies doesn’t come as a surprise, as consumers are increasingly interested in health-focused products. Preqin reported a year ago that a large number of private equity companies are turning their focus to the natural food industry. According to the report, the last decade has seen private equity companies raising around $2.5bn and nearly $1.1bn in uncalled capital. A little over 40% of the latest deals have been on food-focused firms based in the US.


Indeed, ADM’s Patricia Woertz echoed this changing sentiment by acknowledging, “consumers around the world are demanding higher-quality, better-tasting, healthier foods with clean labels.”


The final details of the deal are still unknown, as the deal is subject to regulatory approval. It remains to be seen how the markets react to the news. On Monday the share price was down by 0.9%, which was touching the company’s three-month low. But it is very likely that one of the world’s biggest grain traders will see some positive market reaction as the deal is finalised in the coming few weeks.

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