ADM Raises Stake in Wilmar as Demand for Palm Oil Climbs

On Tuesday October 20, Chicago-based Archer Daniels Midland (ADM) bought 22% of Wilmar International Ltd. shares being traded, or approximately 5.2 million shares, on the Singapore Exchange. Although ADM declined to disclose its total current holdings in Wilmar International, it is known that as of March 10 of this year, ADM held an 18% stake in the group, according to Bloomberg.

ADM has long been maneuvering to diversify its business and increase its exposure to Asian markets, expanding into the flavors and ingredients space, and offering to acquire Australian commodities handler, GrainCorp Ltd. which ships to growing markets in the Middle East and Asia. The deal was consequently rejected by the Australian government.

“This is another way for us to drive results for our shareholders,” said ADM spokeswoman, Jackie Anderson. “Our investment in Wilmar is one of the ways in which we are benefiting from Asian consumers’ growing and evolving food demand driven by rising populations and incomes.”

Wilmar and ADM have been strategic partners on various endeavors and have been cooperating through joint ventures for approximately 20 years. And in a 2006 deal, ADM offered direct holdings in its Wilmar agricultural processing joint ventures in China to Wilmar International in exchange for shares. This latest share purchase is an opportunistic acquisition for ADM, as it comes at a time when Wilmar is trading below book value due to the strength of the U.S. dollar, giving ADM expectations that the return on its investment will exceed its long-term weighted cost of capital of 8%.