ADM eyes one-off deals to expand reach in North America

Tue Apr 3, 2012 7:49pm EDT

* Small, one-off acquisitions more likely than large ones

* After Glencore-Viterra, further consolidation expected

By Karl Plume

CHICAGO, April 3 (Reuters) - U.S. agribusiness Archer Daniels Midland Co will continue to eye acquisitions of smaller assets in North America to expand its reach in the agricultural sector, while large acquisitions may be less likely, a company executive said on Tuesday.

"Other than one-off deals, we can't really grow too much in North America," said A. James Shafter, vice president of mergers and acquisitions said on the sidelines of The State of Agribusiness conference in Chicago.

"We'll always do one-off deals. Elevator assets, transportation assets, if it's in our sector, we'll look at it," Shafter said.

ADM's recent M&A deals include numerous grain elevator acquisitions in the United States and Europe and a partnership with Missouri-based Prairie Pride, a soybean processor and biodiesel producer.

The agricultural sector is in the midst of the largest wave of consolidation since the 1990s, highlighted by a mega-deal last week that saw Swiss-based commodities trader Glencore International Plc buy Viterra Inc, Canada's largest grain handler, for $6.2 billion.

ADM did not submit a final bid for Viterra after deeming the cost of the acquisition would not meet their return objectives.

U.S. grain company Gavilon could be the next major player on the agribusiness auction block in a deal that is expected to attract not only grain companies seeking to expand their U.S. footprint, but also newer investors in the agricultural sphere.

Investors such as sovereign wealth funds, endowments, pension plans and others have been drawn to agricultural investments over the past decade amid the promise of strong returns as global demand for food grows.

But the emergence of the broader range of investors plying for assets such as grain elevators, ethanol plants and railcar loading facilities further underscores the need for grain companies such as ADM to remain disciplined in their acquisitions as the competition stiffens, Shafter said.

"Five or 10 years ago, we'd never see these financial players showing up. There's just been an explosion in agriculture and there's going to become, I believe, a scarcity of assets and we're going to see more and more consolidation," Shafter said.

"Companies have got to be smart and they need to know where they're going to go and they have to be able to react very quickly and decide what deals they want to pursue."

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