Archer-Daniels-Midland Company (ADM) declared the completion of its buyout of Specialty Commodities Inc. (“SCI”), plans of which were announced in mid-October. Though the company had earlier planned to buy SCI for $175 million, it closed the acquisition for a total sum of $191 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. It then distributes them to consumers in the ice cream, snack, bakery, nutrition bar, health food, pet food and bird food markets.
This acquisition 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 has closed the purchase of WILD Flavors GmbH.
Moreover, Archer-Daniels, which competes with Bunge Limited (BG), said that it will form a new business unit called WILD Flavors and Specialty Ingredients. This will include the WILD Flavors businesses and the company’s own specialty ingredients. The new business unit will form a reportable segment from Jan 1, 2015.
This Zacks Rank #3 (Hold) company also made various management changes with the closure of SCI’s acquisition. The company named Ken Campbell as President of this newly acquired business. Prior to this, Campbell was serving Archer-Daniels as vice president of its North American Oilseeds unit.
Further, the company elected SCI’s former Chief Operating Officer, Kevin Andreson as vice president of SCI. Finally, SCI’s ex Chief Executive Officer and founding partner, Larry Leitner, will now serve Archer-Daniel’s WILD Flavors and Specialty Ingredients business unit. Leitner is likely to fuel this business unit’s growth with his profound industry and supply-chain knowledge.
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.
Better-ranked stocks in the same sector include Pilgrim's Pride Corporation (PPC), with a Zacks Rank #1 (Strong Buy) and Amira Nature Foods Ltd. (ANFI), carrying a Zacks Rank #2 (Buy).
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