The CEO of Archer Daniels Midland (ADM) has signalled that the business could invest more money into Southeast Asia and South America to ensure that it is “better balanced geographically”.
Juan Luciano told investors that it would press ahead with plans to grow its operations in both regions, having focused in the past six or seven years on fleshing out its European business. ADM has increased its position in milling and agricultural services, and last March agreed to acquire Chamtor, which manufactures sweeteners and starches based on wheat.
Luciano said it was now “a matter of driving returns” and, with Southeast Asia and South America both lagging behind Europe, the company would continue to selectively invest in businesses that help it drive growth.
The statements have added fuel to the fire surrounding ADM’s rumoured $30 billion takeover of food business Bunge, which would be by far one of the biggest acquisitions in the food and beverage industry. Only a handful of previous transactions – including Anheuser-Busch’s merger with SABMiller and Bayer’s move for seeds company Monsanto – would eclipse the sale price if it were confirmed.
Speculation in the media suggests that the deal could be announced as early as this week.
Luciano continued: “We [say] ‘strategically invest’ because we don’t want to just invest to be big, we want to invest to plug holes in our value chain.”
How big would an ADM-Bunge deal be?
At this stage still rumours, ADM’s much-hyped interest in Bunge seems to be gaining momentum and – if we’re to believe the American media – could be completed soon at a price of around $30 billion. That sort of sum would make it a major play for the food industry, and is only eclipsed by a small number of previous transactions. The biggest is Dow Chemical’s merger with DuPont which completed in August, and FoodBev believes that an acquisition at reported levels would be the seventh largest the industry has seen.
6. Coca-Cola and Coca-Cola Iberian Partners: $31 billion
7. ADM and Bunge: $30 billion (rumoured)
8. Berkshire Hathaway and 3G, Heinz: $28 billion
He also told investors that an increase in ADM’s stake in Asian agribusiness Wilmar International was a milestone in the company’s growth journey. The company’s stake surpassed the 25% mark and its continued investment in the business was part of a three-dimensional approach to realising growth.
As well as increasing its investment in Wilmar and expanding geographically, ADM had planned to “drive market-facing units” – whether that’s in food and beverages, personalised nutrition or animal nutrition. Luciano said it would “continue to do so”, having wound down its focus on oilseeds processing over the last couple of years.
On Tuesday, FoodBev reported that ADM’s full-year revenue fell 2.4% to $60.8 billion. Operating income was also lower both for the year and the fourth quarter, but net income grew.
The company cited Wilmar as one of the motivating factors behind slight growth in Asia, and in January announced the opening of a new innovation centre in Singapore that it said would better allow it to meet the needs of Asian consumers.
© FoodBev Media Ltd 2019