Archer Daniels Midland will capitalize on consumers' craze for natural ingredients with its purchase of Wild Flavors and diversifty its lineup. Fred Katayama reports.
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The self-proclaimed "supermarket to the world" will now sell flavors. Archer Daniels Midland is buying the natural food ingredients company, Wild Flavors, for $3 billion in cash.
ADM beat out Japan's Ajinomoto to nab the deal, according to sources. With Wild, it will capitalize on consumers' craze for natural ingredients and diversify its lineup of agricultural commodities and products. Wild Flavors specializes in producing flavors, seasonings and colors from natural sources, and sells them at a high margin. Wild also produces the popular drink, Capri Sun, but that is not part of of this deal.
ADM's transaction values Wild Flavors at more than 16 times earnings - a much higher price than its peers. Berenberg analyst Evgenia Molotova said, "It will be very difficult for them to extract value at such a high valuation."
ADM's stock has risen more than 30 percent in the last 12 months.
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