CHICAGO, Ill. (Reuters) — Archer Daniels Midland 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.
“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.
“We’ll always do one-off deals. Elevator assets, transportation assets, if it’s in our sector, we’ll look at it.”
ADM’s recent merger and acquisition deals include numerous grain elevators in the United States and Europe and a partnership with Missouri-based Prairie Pride, a soybean processor and biodiesel producer.
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The agricultural sector is in the midst of the largest wave of consolidation since the 1990s, highlighted by a recent mega-deal that saw Swiss-based commodities trader Glencore International buy Viterra, Canada’s largest grain handler, for $6.2 billion.
ADM did not submit a final bid for Viterra after deciding that the cost of the acquisition would not meet its 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 and pension plans have been drawn to agricultural investments over the past decade amid the promise of strong returns as global demand for food grows.
However, the emergence of the broader range of investors plying for assets such as grain elevators, ethanol plants and rail car 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.”
