Moving ahead on the path of strengthening its specialty ingredients portfolio, Archer-Daniels-Midland Company (ADM) recently declared a deal to buy Specialty Commodities Inc. (“SCI”) for $170 million.
Founded almost 30 years back, SCI is a leading processor, distributor and originator of healthy ingredients like fruits, nuts, legumes, seeds and old grains. Further, it works with an international chain of suppliers for sourcing organic and natural ingredients, and then distributes them to consumers in the ice cream, snack, bakery, nutrition bar, health food, pet food and bird food markets.
This acquisition, which is expected to close in a few weeks, is likely to help SCI benefit from Archer-Daniels’ supply-chain capacities, manufacturing efficiencies and world-class innovations. On the other hand, SCI’s customer and quality-oriented business model and geographic reach are likely to prove beneficial for the combined business.
Archer-Daniels is making several attempts to cater to the rising consumer demand for healthy, tasty and superior-quality food. Apart from this acquisition, the company recently announced that it closed the purchase of WILD Flavors GmbH.
Moreover, Archer-Daniels, 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.
In fact, post the acquisition, SCI, whose majority is owned by Goldner Hawn Johnson & Morrison, will form a part of Archer Daniels’ WILD Flavors and Specialty Ingredients unit.
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 invest the same in the best possible resources to enhance returns and minimize earnings volatility. This is also 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.
Likewise, this acquisition is expected to solidify the company’s portfolio, improve its knowledge, focus on consumers and drive returns.
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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