Archer Daniels Midland Company
) finally confirmed
's news that the agribusiness giant is close to taking over the
Switzerland-based WILD Flavors GmbH, a provider of naturally
sourced flavor for foods and beverages. (Please Read:
Archer Daniels at 52-Week High on Wild Flavors
Archer Daniels yesterday announced that it has finalized the
acquisition deal at an enterprise value of 2.3 billion Euros
(approximately $3.1 billion) of which the company will pay 2.2
billion Euros in cash to WILD Flavors' shareholders, Dr. Hans-Peter
Wild and Kohlberg Kravis Roberts & Co. L.P (KKR). The remaining
0.1 billion Euros has been assumed as net debt. The transaction
which is expected to be complete by the end of 2014 will become
Archer Daniels' biggest ever acquisition deal.
Following the company's announcement regarding deal the shares
of this prominent food processing company touched a new 52-week
high of $46.72 yesterday.
Privately-held WILD Flavors is the world's sixth largest
provider of naturally sourced flavors for food and beverages with
over 3,000 customers across the world. It is anticipated that the
company's revenue will reach approximately 1.0 billion in 2014.
Further, WILD Flavors have manufacturing facilities across the
Americas, Asia, Europe and the Middle East.
Currently, Hans-Peter Wild, son of founder Rudolf Wild, owns 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
We believe that the transaction will facilitate Archer Daniels
in diversifying its business portfolio from grain processing to
provider of natural flavors for food and beverages. Moreover, the
deal also fulfills the company's target of investing over 60% of
its capital expenditure toward expansion and gaining a foothold
outside the U.S.
Archer Daniels, which competes with
Wilmer International Ltd
), intends to begin a new business unit called WILD Flavors and
Specialty Ingredients which will include WILD Flavors businesses
and the company's own specialty ingredients. The company
anticipates that the new business unit will generate revenue of
$2.5 billion and displays potential to grow significantly. The
acquisition is also expected to generate cost and revenue synergies
of nearly 100 million Euros by the third year.
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
) both carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
ARCHER DANIELS (ADM): Free Stock Analysis
ADECOAGRO SA (AGRO): Free Stock Analysis Report
LIMONEIRA CO (LMNR): Free Stock Analysis Report
WILMAR INTL LTD (WLMIY): Get Free Report
To read this article on Zacks.com click here.