Cargill to buy ADM’s chocolate business for $440-million

Cargill, the largest privately held US company, has agreed to acquire Archer-Daniels-Midland’s chocolate business for about $440-million to increase production in North America.

The deal comes just over four months after ADM said it was ditching plans to sell its cocoa and chocolate business after long-running negotiations collapsed.

Cargill had been in final-stage talks to buy the combined operation, sources told Reuters last year.

Combining ADM and Cargill’s cocoa operations would have created a company big enough to compete with Barry Callebaut, the world’s largest maker of industrial chocolate products, and would have raised regulatory concerns, particularly in Europe, market participants had said.

ADM also said in April that it had abandoned plans to sell its entire cocoa business as prices for the beans improved and would instead try to sell the chocolate operations.

Cocoa prices have risen 31 percent in the last year as demand surpasses supply, increasing costs for chocolate makers.

“We considered several options to strengthen the returns of this part of our business,” ADM Chairman and CEO Patricia Woertz said. The sale “helps improve ADM’s returns and will allow us to redeploy capital for higher-return investments”.

Woertz in April said ADM had extensive negotiations with a potential buyer for the sale of its global cocoa and chocolate business and couldn’t reach an agreement that met the company’s objectives. ADM then decided to sell its global chocolate business and keep its cocoa presses, she said.

“This acquisition is a major milestone in Cargill’s chocolate growth strategy and will help us better serve our customers in North America and Europe,” said Bryan Wurscher, President Cargill Cocoa and Chocolate North America.

“It will bring together great people with a deep passion and commitment to producing excellent chocolate. Our customers will benefit from a broader product portfolio, greater access to innovation, and product development support.”

The acquisition fits with Cargill’s existing chocolate business and brings together two organizations with broad customer bases and extensive R&D capabilities.

The transaction includes ADM’s three North American chocolate plants, located in Milwaukee, Wis, Hazleton, Pa, and Georgetown, Ontario, Canada. In addition, it includes ADM’s three chocolate plants in Europe, located in Liverpool, UK, Manage, Belgium, and Mannheim, Germany.

These new facilities will extend and complement Cargill’s existing chocolate footprint across North America, Europe, Asia, and Brazil, and increase production capacity, particularly in North America.

Cargill’s product portfolio will now include ADM’s Ambrosia, Merckens, and Schokinag brands. Upon completion Cargill will gain approximately 700 new employees. The transaction is subject to regulatory approval in the United States and the European Union. It is expected to close in the first half of 2015.

Along with dealing in chocolate, ADM and Cargill are two of the world’s top grain traders.

“You’re just tossing it from one big boy to another,” Jack Scoville, vice president of Price Futures Group in Chicago, said about this new development.