Confirming media speculations, Agribusiness company Archer Daniels Midland Co. (ADM) Monday announced the purchase of privately held German flavors and ingredients company WILD Flavors GmbH in cash with an enterprise value of around 2.3 billion euros or $3.12 billion.
The transaction is expected to close by year end. The acquisition is expected to meet ADM's return objectives, with estimated cost and revenue synergies of 100 million euros by the third year.
WILD Flavors has over 3,000 customers worldwide and estimated 2014 net revenues of about 1 billion euros. The company offers food and beverage companies full flavor and ingredient solutions, called flavor systems, and fruit juice concentrates and blends.
The firm also provides other food and beverage ingredients, including natural flavors and extracts, mint oils and flavors, colors from natural sources, sweetening systems, seasonings, specialty ingredients, taste modifiers, and fermentation technologies.
The deal is expected to give ADM the ability to offer food and beverage companies a comprehensive suite of systems to enhance and improve their products.
ADM will pay 2.2 billion euros to WILD Flavors shareholders Dr. Hans-Peter Wild and funds affiliated with Kohlberg Kravis Roberts & Co. L.P., and assume approximately 0.1 billion euros of net debt.
Last week, ADM was reported to have outbid Japanese rival Ajinomoto Co, Inc. to clinch the deal for WILD Flavors.
Currently, Hans-Peter Wild, son of Rudolf Wild, owns 65 percent of Wild Flavors, while U.S. private equity giant KKR & Co. (KKR) owns 35 percent. KKR picked up the stake in January 2010.
ADM Chairman and CEO Patricia Woertz said today, "Together, ADM and WILD Flavors will create one of the leading flavor and specialty ingredient companies in the world, with sales approaching $2.5 billion and significant room to grow."
For ADM, having its own sizeable specialty ingredient business, the deal could provide an enhanced platform for the commercialization of its higher-margin food and wellness ingredients.
Woertz said the deal is consistent with ADM's long-term strategy to diversify the crops it processes and expand and diversify its product portfolio.
Barclays is acting as financial advisor to ADM. Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor.
ADM closed up around 1 percent on Thursday at $45.77.
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