ADM has finalized its €1.544bn acquisition of Neovia
“It is the second biggest acquisition in ADM’s lifetime, the biggest was Wild Flavors in 2014,” said Pierre Duprat, president, ADM Animal Nutrition.
We spoke with him earlier today to get the low-down on the implications of acquiring such an animal nutrition heavyweight for ADM.
“First it is about the scale. Though we are big in the US, we were really a regional player [in the animal nutrition side of things]. Of course, we had developed our premix business in Central America and in China. We were selling some ingredients and amino acids globally, but, besides that, we were local. Therefore, [the deal] brings us scale, access to other markets – Central America with Mexico and South America with Brazil. Neovia is also quite strong in Western Europe. It has already invested in Africa, and it is in many countries in Southeast Asia, so [now we truly have] global reach.”
Neovia’s product portfolio will allow ADM Animal Nutrition to widen its offer to customers as well, he said.
“We have a nice range of ingredients including mycotoxin binders, amino acids, prebiotics, etc. but we are enlarging our range of additives and feed ingredients [through this deal]. Neovia has organic trace minerals, palatants, sweeteners, and a range of probiotics, so we will combine all that.”
On the premix side, Neovia also has a raft of services including in relation to formulation, while its analysis laboratories track quality, traceability and safety of both raw materials and finished products. “These are services we want to integrate in our offer.”
Levering Neovia's aquaculture footprint
Starting from scratch in aquaculture feed is challenging and ADM is going to benefit from Neovia’s holistic approach to that business, he said. Neovia’s aquaculture segment has been addressing everything from feed to management of ponds to ensure quality production that respects the environment. The company invested heavily in this area over the past few years, and claimed leadership positions in the key markets of Brazil, Mexico and Vietnam.
ADM will also leverage Neovia’s strong footprint in pet food in certain markets, he said.
Duprat said Pancosma, the Swiss‐based producer of physiological feed additives that Neovia acquired in 2014, would continue to work independently with a number of customers.
“We want to keep those kind of Chinese walls in place, [where the Pancomsa business might be a direct competitor with Neovia and ADM in terms of certain products].”
Some analysts said the rationale behind the Neovia acquisition was about helping ADM move away from grain merchandising operations and the volatility that comes with that, but Duprat dismissed such an interpretation of strategy.
“That is not the reason at all. We are happy with all the business portfolios we have in ADM. We have been developing the grain merchandising operations, we recently [carried out] acquisitions [in relation to that]. We have been developing the [approach] to go from port directly to customers – destination marketing. We acquired a business in Egypt two years ago; we acquired a business in Israel last year and in the UK this year. We are trying to capture more value along the chain, and that does stabilize the market [for us]. We will keep this business segment within ADM; there is no question about that. Yes, of course, there is some volatility in that business and in the oilseeds one as well. And yes, we continue to develop our food ingredients and nutrition business, and the animal nutrition business - they are less volatile, and have synergies with the origination side, so they can help the entire ADM business to be less volatile.”
Impact on staff
When asked whether there would be job cuts with the merger of Neovia into ADM Animal Nutrition, he said:
“No, we want to grow the business. We want to benefit from the assets and product lines on both sides. It is important that we keep all the sales people and their [long-standing relationships] with customers. Perhaps, there will be [restructuring] on the support, or more corporate functions. There may be a few changes in the organization, here and there, and we will look at that in the coming year.”
Given the scale of this deal, we asked whether ADM Animal Nutrition would continue to look to other acquisition opportunities:
“We have to do a lot of work now, to integrate all of the channels [of Neovia] into ADM; we will spend a lot of time on this, and generate organic growth from that. It is not time for any further acquisitions. Of course, we are always [keeping an eye] on market developments, but we have a lot on our plate at the moment, and we want to get better before getting bigger again.”