Sector News

EU okays acquisition of ADM cocoa business by Olam

June 12, 2015
Consumer Packaged Goods
The European Commission said on Thursday it had approved the acquisition of Archer Daniels Midland Co’s (ADM) cocoa business by Olam International Ltd.
 
The $1.3 billion deal, Olam’s biggest ever, will catapult the Singapore-based commodities firm into the top tier of global suppliers to the growing chocolate business.
 
Olam will acquire one of the world’s largest processors and suppliers of cocoa liquor, powder and butter, with eight factories from Ivory Coast to Singapore.
 
“The Commission concluded that the proposed acquisition would raise no competition concerns, given the companies’ moderate combined market positions and the presence of a number of strong players supplying beans and cocoa products in the European Economic Area (EEA),” a statement said.
 
The companies’ activities overlap in the markets for the procurement and supply of cocoa beans, and the supply of cocoa liquor, butter and powder.
 
The combined entity will make up 16 percent of the world’s total cocoa processing capacity and source over 20 percent of total bean output, and will compete with industry leaders Barry Callebaut AG and Cargill Inc.
 
Olam, hoping to take advantage of a worldwide craving for chocolate, particularly in emerging markets, expects global processing capacity to increase by more than 15 percent by the end of the decade to keep up with demand growth.
 
Competition has nevertheless intensified over the past several years in cocoa grinding, which produces butter and powder to make chocolate bars and drinks, as major players expand capacity in Asia.
 
Margins have also been squeezed by soaring, volatile bean prices.
 
(Reporting by David Brough; Editing by Mark Potter)

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