ADM's acquisition of Wild Flavors will extend the company's reach into new categories.

DECATUR, ILL. — The addition of Wild Flavors will give the Archer Daniels Midland Co. greater access to the European marketplace and to the beverage category. In addition, it will add a key element to its product development portfolio – taste.

“Taste is king,” declared Patricia Woertz, chairman and chief executive officer of ADM, in a July 7 conference call with financial analysts to discuss the proposed acquisition. “It remains the biggest driver of food and beverage buying decisions, even more so than price. So with this acquisition of Wild Flavors, we are adding taste to that platform and we will be able to offer a complete food system to our customers to help them formulate or enhance their product.”

ADM said earlier in the day it had reached an agreement to acquire Wild Flavors, Zug, Switzerland, in an all-cash transaction valued at approximately €2.3 billion ($3.1 billion). As part of the deal, ADM will pay €2.2 billion to Wild Flavors shareholders Hans-Peter Wild and funds affiliated with Kohlberg Kravis Roberts & Co. L.P., and assume approximately €0.1 billion of net debt. The transaction is contingent on regulatory approvals and is expected to close by the end of the year.

Ms. Woertz added that Wild is ranked No. 1 in global natural beverage ingredients and No. 1 in flavor systems for global natural food and beverage ingredients markets.

“They offer customized, hard to copy products with superior taste and natural colors,” she said. “They are a world class innovator with very deep commercial expertise and the ability to take products from concept to market very rapidly. They have a high growth customer base — more than 3,000 customers.”

She added that the businesses are complementary in many ways.

“We are strong in food; they are stronger in beverages,” Ms. Woertz said. “We are strong in North America; they are strong in Europe. We work particularly well with the large C.P.G. firms; they have very strong relationships with small and medium-sized companies and a lot of opportunity for growth. So we feel we have the right amount of similarity and the right amount of difference to create an exceptional opportunity.”

Once the transaction is finalized, ADM is going to create a separate business unit called Wild Flavors and Specialty Ingredients.

“We estimate it will have revenue of about $2.5 billion,” Ms. Woertz said. “The new unit will include many of our ADM specialty ingredients so that, as we’ve just described, we are able to efficiently go to market, go to customers with these complete food systems.”

In an interview with Food Business News, Juan Luciano, president and chief operating officer for ADM, said he estimates the new business unit will have sales “north of $5 billion” in five years after the deal’s closing.

“Two years ago we created a market facing unit to innovate better with customers,” Mr. Luciano said. “It was staffed with marketing, sales and applications people who work in food and wellness. So, we have a strategic plan to become more relevant in that journey. This acquisition is going to enhance our abilities in this area.”

The agreement between ADM and Wild Flavors occurred somewhat quickly, Mr. Luciano said.

“Less than a year ago we went to our board and laid out a strategic plan for our food and wellness portfolio,” he said. “We knew we needed to fill certain gaps. Some we would fill organically and others needed to be filled through acquisition. Wild was a target, because of their excellent reputation. The trigger was their desire to divest and Dr. Wild’s desire to retire.”

Following the announcement by ADM, there was much focus on how it will extend Wild’s reach into the food category. But Mr. Luciano also expressed great interest in what Wild may do for ADM in the beverage segment.

“It’s a market we’ve been working in, particularly with our Clarisoy and Fibersol products,” he said. “It’s why we see this as a perfect combination.

“In the U.S., they have a strength in energy drinks. They are also working in areas like flavored teas and flavored waters. Also we see opportunities to work in the areas of milkshakes and smoothies for food service companies.”

In 2014, Wild’s sales are estimated to be $1.36 billion and EBITDA in the mid-teens. Ms. Woertz said their sales reflect regional diversification and “very good” reach into higher growth markets.