Why did ADM spend $3 billion on a Swiss ingredients company?

ADM's wheat exchange site in Hensler, N.D.

Archer Daniels Midland Company (NYSE: ADM)  completed the acquisition of WILD Flavors GmbH, in October. The $3 billion acquisition is ADM’s largest ever and meant to strategically add a wide portfolio of specialty ingredients for the processed foods industry.

Wild Flavors holds as much as 8 percent of a global market for flavors and fragrance ingredients worth nearly $20 billion, Bloomberg said. More, importantly this market is more stable than traditional commodities at the core of ADM’s  business.

“One of the most important ways we are working to increase returns and reduce earnings volatility is through the growth of our specialty ingredient offerings,” said ADM Chairman and CEO Patricia Woertz. “These high-value products provide the opportunity for increased margins and strong sales aligned with global consumer trends. WILD Flavors is the latest in a series of strategic expansions in specialty ingredients, including our new Brazilian protein specialties complex and our Chinese soluble-fiber facility.”

ADM will form a new business unit, WILD Flavors and Specialty Ingredients, focused in large part soybean-based products like textured vegetable protein, cooking oil, edible beans and other flours and emulsifiers. The North Dakota Soybean Council reported that 2013 acres for beans were at 4.62 million, up from  1.85 million in 2000.

ADM’s stock is up approximately $5 on the year to $47, Oct.31, 2014.

ADM last released its earnings data on Tuesday, August 5th. The company reported $0.77 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.75 by $0.02. The company had revenue of $21.49 billion for the quarter, compared to the consensus estimate of $22.70 billion


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