Shares of Agribusiness giant, Archer-Daniels-Midland Company (ADM) have inched up 1.4% since the company announced the acquisition of WILD Flavors last week. Also, in the same week, the company made an announcement with regard to the expansion of its joint venture with Marubeni Corporation.
The company declared that it has expanded its joint venture with Marubeni Corporation, Kalama Export Company LLC (“KEC”), in the U.S. Pacific Northwest. This expansion took place as Marubeni made its grain export elevator services contribution from its Port of Portland in Oregon to the Columbia Export Terminal, with the latter being a subsidiary of KEC.
KEC was formed by Archer-Daniels, Gavilon Holdings, LLC (subsidiary of Marubeni) and Agrex, Inc., in 1998, to export oilseeds and grains through its grain elevator facility situated in The Port of Kalama, Washington. Post this expansion, the grain elevator facilities at Kalama and Portland will continue to operate individually but their joint ownership is likely to enhance the efficiency of the business.
Further, Archer-Daniels and Marubeni plan to rechristen KEC as Pacificor, LLC. With this expansion, Archer-Daniels moves forward on the path of developing its Agricultural Services value network, in a capital-efficient manner.
Moving ahead to the second announcement, Archer-Daniels recently declared that it has closed the purchase of WILD Flavors GmbH. The company had made an announcement in July where it declared the finalization of the acquisition deal at an enterprise value of 2.3 billion euros (approximately $3.1 billion), making it Archer-Daniels’ biggest ever acquisition deal.
Moreover, the company, which competes with Wilmar International Limited (WLMIY), said that it will form a new business unit called WILD Flavors and Specialty Ingredients which will include the WILD Flavors businesses and the company’s own specialty ingredients. This new business unit will form a reportable segment from Jan 1, 2015.
WILD Flavors and Specialty Ingredients will be headed by Greg Morris as President, who most recently served Archer-Daniels as President of its North American Oilseeds Processing unit. Additionally, Vince Macciocchi, who was the WILD North American Chief Operating Officer, was elected as international president of WILD Flavors.
We have observed that Archer-Daniels is undertaking strategic steps to manage its business portfolio. These are likely to help the company in realizing value from its businesses and investing the same in the best possible resources to enhance returns. This is evident from the company’s recent move of vending its South American fertilizer business and acquiring the remaining 20% minority stake in Alfred C. Toepfer International from Union InVivo.
Archer-Daniels currently carries a Zacks Rank #3 (Hold). However, better-ranked stocks in the industry include Amira Nature Foods Ltd. (ANFI) with a Zacks Rank #1 (Strong Buy) and Calavo Growers Inc. (CVGW) with a Zacks Rank #2 (Buy).
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