Olam completes acquisition of ADM’s cocoa business

Olam International, a Singapore-headquartered commodity trader, has completed the acquisition of ADM’s worldwide cocoa business.

The deal was completed at an enterprise value of $1.2bn on a cash and debt-free basis.

The closing value of the transaction is estimated at $550m in fixed assets and $654m in working capital, subject to the usual purchase price adjustment post-closing.

The deal was announced on 16 December 2014.

Olam International stated: "The acquisition satisfies increasing customer demand for full integration within the cocoa supply chain by bringing together a world leader in cocoa bean sourcing (Olam) and one of the world’s foremost cocoa processors (ADM Cocoa).

"The newly created entity Olam Cocoa offers breadth, depth and scalability, from origin sourcing, trading, risk management, value chain processing and supply chain solutions, to sustainability, research and development, and product innovation."

Over 1,500 cocoa experts have moved from ADM to Olam, who will be based in 11 countries, seven plants, 12 midstream processing facilities, six innovation centres, 20 marketing offices, and over 200 warehouses.

Olam co-founder, group managing director and CEO Sunny Verghese said: "Olam Cocoa is now a leading, global integrated supplier of cocoa products. This is a transformation of an already strong, prioritised business platform, with attractive market prospects that is poised to contribute significantly to Group EBITDA by 2018."

Cocoa business is one of six prioritised platforms identified as part of Olam’s strategic plan ‘to invest and grow’.

Olam expects to gain synergy impact of between $35m and $40m by 2018.

Last month, the commodity trader had indicated that it intends to use S$2.72bn ($1.94bn) on acquisitions to benefit from the global slump of agricultural commodity prices.

There has been a shift in Olam’s acquisition strategy, which earlier focused on smaller transactions, some of which were just above $10m.