ADM raises $850m for bolt-on acquisitions

The ingredients giant has sold shares of agribusiness group Wilmar but retained more than 20% equity in the business

ADM has cut its equity investment in agribusiness Wilmar through two capital raise transactions: the issuance of $300 million aggregate principal amount of zero-coupon bonds, due in 2023 and exchangeable into Wilmar shares, and the secondary block trade of Wilmar shares that settled on Monday. ADM said it raised approximately $850 million through both deals.

The food ingredients giant expects to use the net proceeds from the transactions for general corporate purposes, including potential bolt-on acquisitions. ADM said opportunistic repurchase of ADM shares has already begun and that the fresh capital will support the retirement of higher coupon long-term debt commensurate to the exchangeable bond to ensure the bond transaction is leverage-neutral.

Chief executive Juan Luciano said: “We’re committed to continuing to expand our leadership and innovation across the value chain, for the benefit of our customers, partners and shareholders.

“By reallocating capital while retaining a strong strategic ownership stake in Wilmar, we are enhancing our ability to create shareholder value through potential share buybacks and further bolt-on acquisitions in our nutrition business, even as our agservices and oilseeds business continue to partner with and support the growth of Wilmar in Asia and emerging markets.

“We’ve got great momentum, and we’re excited about our future as we continue to unlock the power of nature to enrich the quality of life.”

ADM has retained a 20-plus per cent equity investment in Wilmar, and has stated that it has no plans to sell additional Wilmar shares.

“These transactions provide ADM with significant balance sheet flexibility, offering the opportunity for further actions to create value while also providing us with the ability to retire some higher coupon long-term debt,” said Ray Young, ADM chief financial officer.

Young added: “Since 2007, Wilmar has been ADM’s largest equity investment, and today our partnership remains a core pillar of our Asia Pacific strategy.”

ADM expects a book gain of approximately $0.12 per share on the block trade in the third quarter; the gain will be treated as a special item for adjusted EPS purposes.

The company does not anticipate any material book or cash tax impacts. ADM’s investment in Wilmar after the transaction represents a market value of approximately $4.4 billion; the company will continue to account for it on an equity basis.