Olam completes acquisition of ADM's cocoa business

by World Grain Staff
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CHICAGO, ILLINOIS, U.S. — Archer Daniels Midland Company (ADM) on Oct. 16 announced that it has completed the sale of its global cocoa business to Olam International Limited.

“I am tremendously proud of the work our entire global team is doing as we continue our journey to improve returns,” said Juan Luciano chief executive officer (CEO) of ADM. “We are delivering on a clear, aggressive plan to create value through strategic growth, an increased focus on operational efficiencies, and — when necessary — the divestiture of businesses that we believe are unable to meet, in the long run, our returns objectives. With each new acquisition, divestiture and strategic investment, we are advancing our plan and making our company stronger and our future brighter.”

The sale is valued at about $1.2 billion, subject to finalization of the post-closing adjustments. About 1,500 colleagues transferred to Olam with the business.

“Having been in cocoa for 32 years, it is with a mixture of pride and purpose that I see two world class businesses unite in Olam Cocoa,” said Gerard Manley, Olam Cocoa’s CEO. “Together we have created a dynamic and experienced enterprise with sustainable sourcing and the iconic deZaan brand at its heart. By maximizing our complementary capabilities in a fully integrated business, we can meet the needs of our 2,000 customers, from pure bean buyers to international brands, both now and in the future.”

The acquisition of ADM Cocoa is expected to be earnings, returns and cash flow accretive in the first full year of consolidation. Olam expects the acquired business to generate an EBITDA of between $180-$200 million including synergies at steady-state in 2018. This represents a 20%-22% growth over the results for the year ended June 30, 2014.  The return from the transaction based on EBITDA on average invested capital is expected to be within Olam’s target midstream value chain returns of 13%-16% in 2018.
Olam Cocoa will now benefit from operating leverage and scale. The combined business optimizes its procurement, manufacturing, logistics, warehousing, trading and risk management systems, and working capital utilization by integrating its entire operation.

“Olam Cocoa is now a leading, global integrated supplier of cocoa products,” said Sunny Verghese, Olam’s co-founder, group managing director and CEO. “This is a transformation of an already strong, prioritized business platform with attractive market prospects that is poised to contribute significantly to Group EBITDA by 2018.”
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