ADM Bulks Up Wilmar Stake

SINGAPORE—Archer Daniels Midland Co. has raised its stake in Asia-focused palm and sugar supplier Wilmar International Ltd., as the U.S. grains giant looks to boost its presence in the world's fastest-growing region.

Wilmar said ADM purchased shares in the open market that represented 22% of total Wilmar shares traded on Tuesday. The companies didn't disclose the number of shares bought or the price paid.

ADM purchased about 5.2 million shares on Tuesday, according to calculations by The Wall Street Journal, raising its 17.3% stake in Wilmar to just over 18%.

"We have opportunistically acquired shares of Wilmar in the open market," an ADM spokeswoman said via email. "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."

In August, Japan's Mitsubishi Corp. announced a US$1.1 billion deal for a strategic stake in Olam International Ltd., as global firms chase growth prospects and cheap valuations in Asia. Commodities firms have been under pressure because of the slump in prices of goods ranging from crude oil to metals.

Still, Wilmar's focus on agricultural commodities has somewhat shielded it from the downturn, which has contributed to a sharp fall in the share prices of companies such as Glencore PLC and Noble Group Ltd.

In December, ADM increased its stake in Wilmar by purchasing shares from Martua Sitorus, Wilmar executive deputy chairman and an associate of Chief Executive Kuok Khoon Hong. Wilmar accounts for about 45% of production and trade in palm oil, which is used in products from biscuits to cosmetics. Wilmar is controlled by Malaysia's Kuok family and ADM is its second-biggest shareholder.

Earlier this year, ADM made several management appointments that included Chief Financial Officer Ray Young overseeing the company's Asia strategy.

ADM said it expects the investment to improve its overall returns. "We continue to be confident in Wilmar's strategic direction as a component of our profitable growth in Asia," the spokeswoman said.

"With a strong dollar and Wilmar trading below book value, we believe Wilmar shares are a good investment," the ADM spokeswoman said.

Wilmar shares are down 1% at 3.14 Singapore dollars (US$2.26) on Wednesday. Its shares declined more than 25% between late May and September, but have regained most of that ground in recent weeks. Wilmar's shares rose 8.9% on Tuesday.

"We believe that the recent fall in Wilmar's share price was overdone and value was emerging below S$2.80. While we had recently reiterated our buy call, we had lowered our fair value to S$3.17 as well," said Carey Wong, an analyst at Oversea-Chinese Banking Corp. in Singapore.

Singapore Exchange queried Wilmar on Tuesday on unusual trading volume and asked the company to disclose any information that could explain the trading. Wilmar said late Tuesday that ADM will notify it with the details of the purchase. The ADM spokeswoman said the company isn't disclosing the information to the media.

Jake Maxwell Watts in Singapore and Jacob Bunge in Chicago contributed to this article.

Write to Gaurav Raghuvanshi at [e-mail]

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(END) Dow Jones Newswires

October 21, 2015 01:15 ET (05:15 GMT)

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