Archer-Daniels-Midland Company ADM has formed a 50–50 joint venture (JV) with Cairo-based Medsofts Group, in a stride to expand its agricultural services business. The JV will hold and administer several merchandising and supply chain operations. The deal is expected to close in early 2016.
Under the joint venture, both companies will equally own and manage different supply chain operations including an international merchandising operation that sends more than 1.5 million metric tons of grains, oilseeds and soft commodities yearly to the Middle East and North Africa. Apart from this, the JV also includes a local grain distribution operation that caters to consumers in Egypt and an inland logistics system that links port operations to customers throughout Egypt.
Moreover, the JV will also have a 50% share in Nile Stevedoring & Storage Co. (NSSC), which operates one of the major grain port services in Egypt. The facility has a yearly release capacity of more than 2 million metric tons together with extra land which can be used for further expansion.
Archer Daniels’ partnership with Medsofts not only expands the former’s merchandising footprint but also helps it to augment its logistics and marketing capabilities. Moreover, this grouping of resources is expected to enhance customer satisfaction and increase shareholder value.
In order to diversify its reach and enhance its global supply chain, Archer Daniels had earlier opened new distribution and merchandising offices in Central America, Asia and Africa. Simultaneously, it had bought a port and shipping agency in Brazil and planned key expansions at port services in Argentina and Brazil. Additionally, it launched ARTCO Stevedoring and acquired full rights of strategically-located terminals on the Black Sea.
We note that earlier this year, the company has formed another 50–50 JV with the Berg family-owned Quality Liquid Feeds Inc., in order to expand capabilities of its livestock business and increase profitability.
Zacks Rank
Archer Daniels currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the related food industry include Campbell Soup Company CPB, The Chefs' Warehouse, Inc. CHEF and Omega Protein Corporation OME. All three stocks carry a Zacks Rank #1 (Strong Buy).
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