Cargill Buys ADM Cocoa Business

Cargill Buys ADM Cocoa Business

Cargill is in the final stages of a deal to buy Archer Daniels Midland Co's cocoa business, creating a price-setting global giant.

Combining two of the world's top cocoa merchants and bean grinders would create a company big enough to compete with Zurich-based Barry Callebaut , the world's largest maker of industrial chocolate products.

"As the cocoa market will now be dominated by both Barry Callebaut and Cargill, the small players need to be competitive or they might risk being squeezed out of the market," said Vanessa Tan, an investment analyst at Phillip Futures in Singapore.

Financial details of the deal were not clear, although some sources had said this summer that the unit may be worth as much as $2 billion.

"Cargill and Barry Callebaut combined will account for more than 50 percent of global capacity. In the future, grinders like Blommer in the U.S. and smaller grinders in Asia will find it tougher and tougher to compete with the giants," said a Singapore-based dealer who has a grinding facility in Indonesia. "You might see consolidation among the smaller ones."

Some analysts and bankers have cautioned that competition concerns would arise, particularly in Ivory Coast and Ghana, the world's top two growers, where both companies own processing plants.

ADM, Cargill and Barry Callebaut account for as much as 40 percent of world cocoa bean grinding capacity and also dominate exports from the top producing nations, according to a United Nations report on the global cocoa industry from 2008.