Exclusive: Cargill close to agreeing purchase of ADM cocoa unit - sources

Wed Oct 2, 2013 4:14am EDT
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By Ange Aboa and Olivia Oran

ABIDJAN/NEW YORK (Reuters) - Cargill Inc CARG.UL, one of the world's leading cocoa traders, is in the final stages of a deal to buy Archer Daniels Midland Co's (ADM.N: Quote) cocoa business, sources familiar with the situation said, creating a price-setting global giant.

Combining two of the world's top cocoa merchants and bean grinders would create a company big enough to compete with Zurich-based Barry Callebaut (BARN.S: Quote), the world's largest maker of industrial chocolate products.

Cargill and ADM are hammering out the final details of the deal, said the sources, paving the way to the second major takeover this year in an industry that is set to be dominated by two firms. The timing of an official announcement is not known but could be made within days, the sources said.

"As the cocoa market will now be dominated by both Barry Callebaut and Cargill, the small players need to be competitive or they might risk being squeezed out of the market," said Vanessa Tan, an investment analyst at Phillip Futures in Singapore.

Financial details of the deal were not clear, although some sources had said this summer that the unit may be worth as much as $2 billion.

Cargill was long believed to be one of only a handful of companies with the expertise and focus on the niche cocoa business to buy ADM's business, which spans Africa, Asia and the United States. The U.S.-based agribusiness firm had begun conducting due diligence earlier this year.

In July, Barry Callebaut sealed its $860 million acquisition of the cocoa ingredients division of Petra Foods PEFO.SI.

ADM started looking for potential suitors for the business late last year, sources have told Reuters, and the company announced it was in discussions about a possible sale in June.   Continued...

A logo is pictured on the building of Cargill International SA in Geneva August 4, 2009. REUTERS/Denis Balibouse