April 21, 2015
ADM to buy over corn mills from joint venture
Archer Daniels Midland Company (ADM) has announced an agreement to purchase several assets of Eaststarch C.V., ADM''s 50-50 joint venture with Tate & Lyle.
Under the terms of the agreement, ADM will take full ownership of corn wet mills in Bulgaria and Turkey, in addition to a 50% stake in a wet mill in Hungary.
Taking full ownership of an Eaststarch facility in Slovakia, Tate & Lyle will receive a cash consideration of US$256 million, subjected to customary closing adjustments, including for net cash and working capital.
"Our corn business is creating shareholder value through geographic expansion and the increasing diversification of our product portfolio," said Chris Cuddy, the president of ADM''s corn processing business unit. "With the coming end of sugar production quotas in the EU, the artificial cap on cereal-based sweeteners will be lifted."
Cuddy added that there will be "tremendous opportunities in the new European sweetener market, including a particularly strong opening in Eastern Europe, where there is less sugar production".
"By acquiring a greater ownership of these corn assets, ADM will be able to better serve our customers as they meet this expanding European demand for sweeteners. At the same time, we are improving our capabilities to meet customer needs in the growing market for starch in Europe," Cuddy said.
The facilities in Bulgaria, Turkey and Hungary have a combined daily grind capacity of approximately 200,000 bushels, producing primarily sweeteners and starches.
The Hungarian facility produces ethanol for fuel, beverage and industrial uses.
Together, the facilities could boost ADM''s global grind capacity for corn by 7.5%, to approximately three million bushels daily.
"The value of this transaction reflects the anticipated decline in EU sugar prices," Cuddy added. "We expect this deal to meet our returns objectives."
As part of the transaction, ADM will supply Tate & Lyle with crystalline fructose from the Turkish facility. In addition, Tate & Lyle will appoint ADM as the exclusive agent for the sale of liquid sweeteners and industrial starches produced by its EU plants.
ADM is seeking to close the deal this summer.