EU Opens Probe Into Cargill Purchase of ADM Chocolate Business -- Update

By Jacob Bunge And Tom Fairless 

BRUSSELS--European Union authorities have opened an in-depth investigation into Cargill Inc.'s planned $440 million purchase of Archer Daniels Midland Co.'s chocolate business amid concerns the deal could lead to higher prices for sweets.

The European Commission, the EU's top antitrust authority, said its preliminary investigation into the transaction, announced in September, "showed potential competition concerns in the supply of industrial chocolate to customers in Germany and the U.K."

The deal would expand the number of Cargill's chocolate and cocoa facilities by one-third and extend a string of consolidation in the industry. Cargill, already among the world's top industrial chocolate producers, has called the acquisition a "major milestone" in its growth strategy for the business.

Cargill and ADM--U.S. rivals that are among the world's largest traders and processors of agricultural commodities--now anticipate closing the transaction in mid-2015, a shift from earlier projections that it would close by July, company representatives said Monday. Both companies will work with EU regulators to address their questions, they said.

The European Commission said it would make a final decision on whether to approve the deal by July 8. It announced the in-depth probe after some chocolatiers said they feared consolidation among industrial producers could raise their prices and lead to more-expensive candy for consumers.

"The proposed transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases," the European Commission said Monday.

The commission's concerns follow recent signs of slumping chocolate demand. In January, the European Cocoa Association reported that cocoa-bean processing in Europe fell 7.4% in the fourth quarter from a year earlier, a bigger-than-expected decline. In North America, cocoa grinding slipped 2% over the same period.

Cargill said in January that the data were a "sign of a weaker demand environment" that the suburban Minneapolis company expected to persist over the first three months of 2015.

Write to Jacob Bunge at [e-mail] and Tom Fairless at [e-mail]

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