Reports: Cargill Close to Acquiring Close ADM's Cocoa Business

4 Oct 2013 --- Cargill is in the final stages of a deal to buy ADM’s cocoa business, sources familiar with the situation said, creating a global giant. The two rivals are hammering out the final details of the deal, said the sources, paving the way to the second major takeover this year in an industry that is set to be dominated by two firms.

The timing of an official announcement is not known but could be made within days, the sources said.

According to a Reuters report, financial details of the deal were not clear, but the ADM unit, which spans Africa, Asia and the United States, has been estimated to be worth as much as $2 billion.

Cargill’s purchase of ADM’s cocoa business would mean the market will then be dominated by Barry Callebaut and Cargill, with the two combined accounting for more than 50 percent of global capacity, which could lead to some consolidation in the industry as smaller grinders try to compete with the giants, the report said.

ADM, which is looking at moving its headquarters to Chicago from Decatur as its expands it global business, is in the process of buying Australia's GrainCorp. Ltd. for $3.1 billion. The company last week said it expects the deal to close by the end of the year.

The sale will increase Cargill's stronghold in the market already dominated by just a handful of firms and marking the exit of one of the industry's biggest players.

In July, Barry Callebaut sealed its $860 million acquisition of the cocoa ingredients division of Petra Foods .

Cargill beat out smaller rivals who were interested in picking up individual assets, but resisted buying the whole business, three sources familiar with the matter said.

Some analysts and bankers have cautioned that competition concerns would arise, particularly in Ivory Coast and Ghana, the world's top two growers, where both companies own processing plants.

ADM, Cargill and Barry Callebaut account for as much as 40 percent of world cocoa bean grinding capacity and also dominate exports from the top producing nations, according to a United Nations report on the global cocoa industry from 2008.

Just 10 companies account for two-thirds of global grinding, the report said.