Agriculture Giant ADM Is in Advanced Talks for Ethanol Mills Deal
(Bloomberg) -- Archer-Daniels-Midland Co., the agribusiness giant that helped draw the blueprint for the U.S. biofuel industry, is in advanced talks for a deal that could involve a sale or a joint venture for its ethanol dry mills.
The 118-year old agricultural commodities company is currently in negotiations with fewer than five interested parties, Chief Executive Officer Juan Luciano said in an interview Wednesday at the company’s headquarters in Chicago. He declined to name the companies taking part in the discussions.
“We are advancing things with several different parties, and I can disclose right now that we are advanced in those discussions,” he said. “We want to find either the right buyer or the right partner for these things, and at this point in time, we haven’t made that decision, but we are close.”
The American ethanol industry has been hurting after a rapid expansion fueled by a bet on increased demand from China. But President Donald Trump’s trade war with Beijing ended up stifling exports. Meanwhile, biofuel proponents blamed the U.S. administration’s policy of exempting some oil refiners from blending requirements for adding to the industry’s pain.
This is not the first time ADM, which started producing ethanol in 1978, has tried to divest its dry mills. In 2016, the company put the assets up for sale, evaluated bids and ended up deciding to keep the business.
“I wanted to make sure from the beginning of my tenure that we were going to focus on nutrition and food, not in fuels,” Luciano said. “I like ethanol as a product -- I do believe there’s a lot of potential -- I just don’t feel that that’s a business for us.”
ADM moved its three ethanol dry mills into a wholly-owned subsidiary called Vantage Corn Processors last month. The move should facilitate a deal because it separates the three mills and makes clear any agreements that an interested party would have with ADM as the facilities are integrated with other assets.
“Now if you are an interested party, you know exactly what you get, including all the side agreements that you have with ADM,” Luciano said. “That’s a big step. Now the issue is we need to find the best deal, the deal that makes the best business sense for us.”
ADM, the “A” in the so-called ABCD quartet of storied agricultural commodities traders, moved into ethanol after President Jimmy Carter asked agribusiness leaders to make biofuels as a way of reducing petroleum dependence. Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. round out the quartet.
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