Archer-Daniels-Midland Co (ADM) raised its stake in Wilmar International Ltd, the Singapore-based company that trades almost half the world’s palm oil, as demand for the commodity grows.
ADM, the world’s largest corn processor, “opportunistically acquired shares of Wilmar in the open market” company spokeswoman Jackie Anderson said in an e-mailed statement.
Tuesday’s purchases represented about 22 percent of the Wilmar shares traded on the Singapore exchange — equating to about 5.2 million shares — according to Chicago-based ADM, which declined to disclose its current total stake.
ADM had an 18 percent stake in Wilmar — 1.16 billion shares — as of March 10, according to data compiled by Bloomberg.
ADM, which makes food, fuel and feed from corn, soybeans and other crops, has tried to diversify beyond the US and boost its presence in the Asian market.
An offer to buy Australian crop handler GrainCorp Ltd to ship agricultural commodities to growing populations in Asia and the Middle East was blocked by the Australian government two years ago.
“This is another way for us to drive results for our shareholders,” Anderson said. “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.”
Wilmar shares jumped 8.9 percent to S$3.17 on Tuesday, the biggest gain in more than six years, as ADM shares fell 0.6 percent to US$45.70 in New York. ADM is Wilmar’s biggest shareholder.
Wilmar is a “strategic partner” and one of the company’s biggest customers, Anderson said.
ADM has worked with Wilmar for about two decades. It earlier had joint ventures and then in 2006 contributed direct holdings in its Wilmar-related agriculture processing joint ventures in China to Wilmar International Ltd in exchange for shares.
The stock is a good buy given the strength of the US dollar and because Wilmar is trading below book value, and ADM expects the return on its investment to exceed its long-term weighted average cost of capital of 8 percent, Anderson said.
“This move enhances our ability to benefit from growing consumer demand in Asia,” Anderson said.
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