(Reuters) – Global agricultural merchant Ecom Agroindustrial Corp and its smaller U.S. rival V&A Commodity Traders Inc have joined forces to create a medium-sized sugar merchant, the latest deal to transform the struggling sweetener market.
V&A Trading, owned by Seacor Holdings, said on Wednesday the companies have agreed to merge their sugar operations to form a new company called VA&E Trading UK LLP, with offices in New York, London and Sao Paulo.
The company will be up against much bigger rivals, like Alvean, the joint venture between Cargill Inc and Brazil’s Copersucar, and ED&F Man, in the fiercely competitive 180-million-tonne market.
After five years of excess global sugar supplies, profit margins in the sector have shrunk, with raw prices languishing close to or below production costs for many mills.
Combining Ecom’s strength in sourcing from cane farmers in top grower Brazil was an “excellent fit” with V&A’s access to end users in Africa and the Americas, Carter King, chief executive officer of V&A and joint boss of the new company, said in an interview.
“Together we have this more seamless operation to extend our reach,” he said, noting that the new business will have about 30 employees.
King would not disclose the terms of the deal, which he described as a “true merger” and was finalized on Tuesday.
He will run the business alongside Clovis Junqueira, Ecom’s sugar chief.
The deal is the latest in a series that will shrink the number of players in the fragile industry.
“The margins are as thin as ever,” said King.
Last month, Archer Daniels Midland Co started scaling back its modest-sized trading operation, while multinational traders like Bunge Ltd have tried to sell mills in Brazil in recent years.
Both V&A and Ecom are both fairly sugar entrants, dwarfed by larger, more established players.
Ecom made its first foray in 2012, and V&A is less than a decade old.
By Chris Prentice (Writing by Josephine Mason; Editing by Andrew Hay and David Gregorio)