* Biggest ever acquisition for ADM
* Gives ADM access to growing flavouring and health markets
* KKR more than triples its investment
(Adds comments from ADM chief, KKR, analyst)
By Freya Berry and Arno Schuetze
LONDON/FRANKFURT July 7 U.S. agribusiness Archer
Daniels Midland (ADM) has agreed to buy Swiss-German
natural ingredient company Wild Flavors for 2.3 billion euros
($3 billion) to enter the flavouring and the health-conscious
ADM, one of the world's largest grain traders and a major
food processor, said on Monday it would establish a new business
unit called Wild Flavors and Specialty Ingredients and expected
to complete the deal by the end of the year.
Wild Flavors - ADM's first venture into the flavours market
- specializes in natural ingredients. The acquisition, which ADM
said was its biggest ever, comes as consumers have been showing
increasing appetite for foods made of only natural components.
The deal comes eight months after Australia rejected ADM's
attempt to acquire grain handler Graincorp Ltd for
A$2.8 billion ($2.55 billion) because of concerns the deal was
Illinois-based ADM, which has been seeking to expand
globally, will need regulatory approval from eight
jurisdictions, including the European Union, to acquire Wild,
Chief Executive Officer Patricia Woertz said on a conference
"We have been known often as a commodity business only," she
said. "Now that's probably a misunderstanding."
Private equity group KKR & Co, which bought a 35
percent stake in Wild in 2010, has more than tripled its
investment, a person familiar with the investor said.
Sources told Reuters in May that ADM was among private
equity and strategic bidders for Wild Flavors,
which sources said expected 2014 core earnings (EBITDA) of
almost 140 million euros.
"This was an asset with scarcity value, so we always thought
there's value for a strategic player on this," said Christian
Ollig, director for private equity at KKR. "It was a competitive
process to the end."
The transaction, which includes around 100 million euros of
net debt, values Wild Flavors at a hefty multiple of 16.4 times
its core earnings against a peer multiple of 11, according to
Thomson Reuters data. ADM is targeting 100 million euros of cost
savings by the third year of the acquisition.
"I think it will be very difficult for them to extract value
at such a high valuation," said Evgenia Molotova, an analyst at
Wild Flavors, headquartered in Zug with management offices
in Heidelberg-Eppelheim, Germany, is the world's sixth-biggest
flavour provider. Hans-Peter Wild, son of founder Rudolf Wild,
owns 65 percent of the group. Wild is also the owner of a
separate company that makes the drink Capri-Sun but is not part
of the deal.
With the purchase of Wild, which is advertising a new summer
fruits range on its website, ADM will obtain access to a variety
of flavours, seasonings and colours derived from natural sources
and used in processed foods and drinks.
Wild's strong position in Europe and in the beverage sector
will complement ADM's operations in North America and the food
sector, Woertz told analysts.
Still, Citi analyst David Driscoll said he considered ADM a
bulk commodities company and "not as a science-y type
During the conference call, Woertz referred to Wild's team
of scientists and "flavourists."
RECIPE FOR SUCCESS?
The acquisition of Wild could be a platform for ADM to
further expand its specialty business, ADM President Juan
The flavours market is considered less volatile than
commodities trading, a sector in which global weather events can
send prices for crops on a roller coaster ride.
Almost 30 percent of new food manufacturing product launches
over the past two years have been based on the health sector,
Molotova said. The sector is "very cash-generative with stable
earnings growth," she added.
Barclays acted as financial adviser to ADM while Citi and
Freshfields advised the sell side. Skadden, Arps, Slate, Meagher
& Flom LLP acted as legal adviser to ADM.
($1 = 0.7345 Euros)
(Additional reporting by Tom Polansek in Chicago, and Alexander
Hübner and Supriya Kurane; Editing by Jane Baird and Lisa