Olam closes ADM Cocoa acquisition
Deal results in newly created entity Olam Cocoa
Olam Int’l Ltd. has finally completed its $1.2 billion acquisition of ADM’s cocoa business — and the result is the newly created entity Olam Cocoa.
The deal was originally announced almost a year ago back on Dec. 16, 2015, and it officially closed on Friday, Oct. 16. Specifically, the closing value comes out to about $550 million in fixed assets, and $654 million in working capital subject to the usual purchase price adjustment post closing.
Olam says 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).
Olam Cocoa is slated to offer offer 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.
And, more than 2,400 dedicated cocoa experts, of whom 1,500 joined from ADM, will be based in a total of 11 producing countries, seven usines (factories), 12 midstream processing facilities, six innovation centers, 20 marketing offices, and more than 200 warehouses.
“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,” says Gerard Manley, Olam Cocoa’s ceo. “Together we have created a dynamic and experienced enterprise with sustainable sourcing and the iconic deZaan brand at its heart.”
Gerard adds that the new deal will also help Olam meet the needs of its 2,000 customers, which includes everyone from pure bean buyers to international brands.
Jeff Pfalzgraf, who was the v.p. of ADM Cocoa’s Global Operations and now designated as global head of manufacturingfor Olam Cocoa, says the completion of the deal marks, “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,” he adds. “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.”
A strong strategic fit
Renowned for its farm-gate origination, sustainability programs, 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 optimizes its procurement, manufacturing, logistics, warehousing, trading and risk management systems, and working capital utilization by integrating its entire operation. Olam expects to derive synergy impact of between $35 million and $40 million by 2018.
The acquisition of ADM Cocoa is also 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 $180 million and $200 million including synergies at steady-state in 2018.
That represents a 20-22 percent growth over the results for the year that 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 percent in 2018.