HC Insider Insights - Consolidation of plant-based projects continues apace
Category: Insights

Demand for green products drive further M&As

Recent M&A deals in the food and agricultural industry are consolidating companies’ plans in strategic segments such as plant-based meats and renewable fuels.

A global staff shortage has delivered a significant hit to the food and agricultural industry. According to Bloomberg, a 33% year-on-year rise in food prices in August 2021 can be attributed to rising commodity prices and freight rates, as well as wage increases across the global food ecosystem. Continued Covid-19 outbreaks and the rise of the Delta variant in many parts of the world have created a bottleneck in the food supply chain as producers struggle to find enough staff to collect or harvest produce.  

Now that workers have a wider range of job opportunities to choose from, employers are starting to increase wages and even offer perks. Hiring activity in this sector is also being driven by growing consumer interest in environmental issues, which has resulted in demand for alternative or plant-based meats and renewable fuels produced with soybeans.  

ADM boosted its plant-based meat offering with the purchase of Sojaprotein in July 2021, a leading European provider of non-GMO soy ingredients. The company describes the plant-based protein market as one of its core growth platforms.  

Marathon and ADM announced an agreement to form a joint venture for the production of soybean oil to supply rapidly growing demand for renewable diesel fuel. Bunge and Chevron have also announced a joint venture that will see the latter invest $600m into two Bunge soybean crushing facilities. The deal will provide Chevron with first refusal on soybean oil produced at the facility. 

Cargill reported record annual profits in May 2021 of nearly $4.3bn for the first nine months of its fiscal year. According to Bloomberg, this surpassed its best ever annual profit of $3.95bn in 2008, highlighting the company’s success during the current agricultural boom. Fitch Ratings attributes this strength to “the solid underlying structural demand shift for food, fuel and feed within a tight commodity supply environment”. 

Capitalising on the growth, Cargill and Continental Grain announced plans in August 2021 to acquire Sanderson Farms, the third-biggest chicken farmer in the US, for $4.5b or $203 per share. Cargill and Continental Grain will combine Sanderson Farms with Wayne Farms LLC, a Continental subsidiary. Wayne Farms CEO Clint Rivers will head the combined company upon the deal’s closing, which the companies expect will occur in late 2021 or early 2022. 

In other news of trending agriculture growth, Olam has announced its intention to list Olam Food Ingredients (OFI) on the London Stock Exchange. Olam International itself is worth about $4.5 billion as of mid-September 2021, and the London listing for OFI could raise about $2.8 billion, Reuters reported in August. 

Contact hcinsider@hcgroup.global for our Q3 2021 Market Review.

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