Chocolate Ingredients / Ingredients / News

Petra Foods, Barry Callebaut head to arbitration

Two companies can’t reach agreement on price for Petra Foods cocoa division.

December 18, 2013
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Things have gotten a little tense between Barry Callebaut and Petra Foods.

An arbitrator has been called in to help with a deal of Barry Callebaut purchasing Petra Food’s cocoa ingredients division, Singapore.Petra Foods Barry Callebaut logos

The two companies cannot agree on a fair price for the cocoa ingredients division.

The deal originally was announced in December of 2012, and was expected to close by the summer of 2013.

At the time, Barry Callebaut had said it would pay $950 million for the division. The deal also included a long-term agreement with Petra Foods' branded consumer division to supply Barry Callebaut with cocoa products, covering 75 percent of its total needs.

However, since then, things have gotten complicated.

In July of 2013, Petra Foods announced to its shareholders that the deal was completed. The announcement did say that the company had gone down in value from the original price.

At that time, Petra Foods expected to receive $860 million from Barry Callebaut. And the reduced priced was primarily attributed to a lower level of working capital, by about $74 million.

The announcement also said the final price would only be determined after the post-completion adjustments in accordance with the Share Purchase Agreement and the net borrowings relating to the Cocoa Ingredients business.

Then, in October of 2013, Petra Foods released another update on the situation.

The company claimed that Barry Callebaut wanted to further reduce the price by as much as $98 million, bringing the priced down to $762 million.

Petra Foods didn’t agree with the new number though.

And that’s what has led the two companies to arbitration.

“The Company... considers that the price adjustments sought by Barry Callebaut do not have a proper or valid basis and/or have not been properly substantiated or justified,” Petra Foods wrote in a notice to it’s shareholders.

Barry Callebaut felt differently though.

“It was always foreseen in the purchase agreement that some of the assets will be reviewed after the closing, which is a technical discussion on the valuation of certain assets,” the company said at full-year results presentation on Nov 7, 2013. “For us there is no downside — we paid the purchase price of $860 million and might get money back. Also, the current discussion does not change our view on the business in any respect nor does it affect the integration process of the new business into Barry Callebaut.”

If the two sides are eventually able to work things out, the deal would make Barry Callebaut the world’s largest cocoa processor. The deal also is expected to boost Barry Callebaut's sales volume in the Asia and Latin America markets by 65 percent and will help the company expand its cocoa powder market share.

In addition, it’s expected to allow Barry Callebaut to create a sourcing base in Asia. Currently Barry Callebaut’s only sourcing base is West Africa.   

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