Olam International Closes ADM Cocoa Acquisition

19 Oct 2015 --- Olam International has announced that the acquisition of ADM’s worldwide cocoa business, previously announced on December 16, 2014, was successfully completed on Friday, October 16, 2015 at an enterprise value on a cash free and debt free basis of about US$1.2 billion. The closing value is estimated at US$550.0 million in fixed assets and US$654.0 million in working capital subject to the usual purchase price adjustment post closing.

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 2,400 dedicated cocoa experts, of whom 1,500 have today joined from ADM, will be based in a total of 11 producing countries, seven usines, 12 midstream processing facilities, six innovation centres, 20 marketing offices and more than 200 warehouses.

Olam’s 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.”

CEO of Olam Cocoa, Gerard Manley said: “Having been in cocoa for 32 years, it is with a mixture of pride and purpose that I see two world class businesses unite in Olam Cocoa. Together we have created a dynamic and experienced enterprise with sustainable sourcing and the iconic deZaan® brand at its heart. By maximising our complementary capabilities in a fully integrated business, we can meet the needs of our 2,000 customers, from pure bean buyers to international brands, both now and in the future.”

Jeff Pfalzgraf, who was the Vice President of ADM Cocoa’s Global Operations and now designated as Global Head of Manufacturing of Olam Cocoa, said: “This is a momentous day for me and my colleagues around the world as we join Olam Cocoa. Anyone working in the cocoa sector knows how much passion it inspires. Through Olam Cocoa we are now perfectly poised to take our combined experience and values to customers based on our manufacturing expertise, whilst exploring new opportunities.”

Cocoa business is one of six, prioritised platforms identified “to invest and grow” in Olam’s strategic plan. Renowned for its farm-gate origination, sustainability programmes, trading and export presence in the major cocoa origins prior to the acquisition, Olam’s cocoa business had already started to successfully integrate its supply chain by investing in origin processing in Côte d’Ivoire and Nigeria, and in value-added midstream processing facilities in Spain and the UK.

Olam Cocoa will now benefit from operating leverage and scale. The combined business optimises its procurement, manufacturing, logistics, warehousing, trading and risk management systems, and working capital utilisation by integrating its entire operation. Olam expects to derive synergy impact of between US$35.0 and US$40.0 million by 2018.

The acquisition of ADM Cocoa is expected to be earnings, returns and cash flow accretive in first full year of consolidation. Olam expects the acquired business to generate an EBITDA of between US$180.0 and US$200.0 million including synergies at steady-state in 2018. This represents a 20-22% growth over the results for the year ended June 30, 2014. The return from the transaction based on EBITDA on average invested capital is expected to be within Olam’s target midstream value chain returns of 13-16% in 2018.

Commenting on the news, ADM CEO Juan Luciano said: “I am tremendously proud of the work our entire global team is doing as we continue our journey to improve returns. We are delivering on a clear, aggressive plan to create value through strategic growth, an increased focus on operational efficiencies, and—when necessary—the divestiture of businesses that we believe are unable to meet, in the long run, our returns objectives. With each new acquisition, divestiture and strategic investment, we are advancing our plan and making our company stronger and our future brighter.”