Shares of Archer Daniels Midland Company (ADM) hit a new 52-week high of $45.95 on Thursday, Jul 3, 2014, after the leading global financial information provider Bloomberg announced that the company is close to taking over Wild Flavors Inc., a provider of naturally sourced flavor for beverages and foods.
Bloomberg quotes that the agri-business giant outbid the closest Japanese rival Ajinomoto Co, Inc. by making a buyout bid of 2.5 million Euros (or approximately $3.4 billion). However, according to sources, Ajinomoto still stands a chance as the deal has not yet been concluded.
Privately held company, Wild Flavors is the world’s sixth largest provider of naturally sourced flavors for food and beverages with a turnover of $838 million in 2012. The company has manufacturing facilities across the Americas, Asia, Europe and the Middle East.
Currently, Hans-Peter Wild, son of founder Rudolf Wild own 65% of Wild Flavors’ stake while the remaining stake is held by KKR & Co. In 2012, the company acquired Cargill Inc.’s juice blends business and added approximately $200 million to its total revenues. Apart from this, the acquisition also sets the platform for Wild Flavors to grow its business in Asia and North America.
We believe that the transaction if concluded will facilitate Archer Daniels’ diversification of its business portfolio from grain processing to provider of natural flavors for food and beverages. Moreover, the deal will also fulfill the company’s target of investing over 60% of its capital expenditure toward expansion and gaining a foothold outside the U.S. If the deal finalizes, it will be the biggest acquisition of Archer Daniels.
We have observed that Archer Daniels is undertaking strategic steps to manage its business portfolio, which is expected to help in realizing value from its businesses and investing the same in 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 of Alfred C. Toepfer International from Union InVivo.
Other Stocks Worth Considering
Archer Daniels currently carries a Zacks Rank #4 (Sell). However, some better-ranked stocks in the agricultural products industry include Limoneira Company (LMNR), Adecoagro S.A. (AGRO) and Wilmer International Limited (WLMIY), all these carrying a Zacks Rank #2 (Buy).