Disagreement over price led Archer Daniels Midland to abandon talks to sell its global cocoa business and narrow its focus to finding a buyer for a smaller string of chocolate factories instead.
New York-listed ADM, the agribusiness group, was in final negotiations to sell its third-ranked cocoa processing business to number two Cargill, the Financial Times reported late last year. Industry executives estimated it was worth about $2bn.
ADM said on Tuesday that it would keep the majority of its cocoa press operations. Separately, it has engaged advisers to pursue the sale of its chocolate business. Cocoa processors turn beans into cocoa butter and powder, while chocolate manufacturers produce the chocolate.
Juan Luciano, ADM president and chief operating officer, said the cocoa business “is probably the most global” of the company’s businesses, with dispersed operations, multiple plants and many employees.
“Both parties assigned a different value,” he said. “At the end of the day, it ended up being an issue of value, as normally happens in these deals.”
He declined to specify what price ADM had sought. Cargill said it was always looking at potential investments and assessing business opportunities, but declined to comment on cocoa negotiations.
Mr Luciano said: “Over the last month we’ve been negotiating, we came to the conclusion that there is more value for the shareholders of ADM to proceed with this smaller transaction in chocolate.” ADM has chocolate manufacturing operations in Canada, the US, Belgium, Germany and the UK.
The move comes as ADM attempts to achieve returns on invested capital that are at least 2 percentage points above its weighted average cost of capital. Returns have fallen short of this goal.
The company’s “cocoa and other” segment had an operating loss of $33m last year, after an operating profit of $276m in 2012. While the cocoa grinding business will meet goals for investment returns, “we don’t believe the same for the chocolate business and we are divesting,” Mr Luciano said.
ADM said it had reached an agreement to sell a fertiliser blending business in Brazil and Paraguay to Mosaic, the New York-listed crop nutrients group, for $350m.
ADM said it would take full ownership of Alfred C Toepfer International, a Hamburg grain trading subsidiary, by acquiring the remaining 20 per cent stake it does not already own for €83m from French farming co-operative Union InVivo.
Toepfer has strong relationships with farmers in eastern Europe and Argentina, both large agricultural exporters. The unit has struggled with problems including corn shipments that were turned away by Chinese inspectors.
Shares of ADM fell 0.9 per cent to $44.27, while Mosaic rose 2 per cent to $48.37.