How Will Archer Daniels Midland (ADM) Stock React To A $3.4 Billion Wild Flavors Deal?

NEW YORK (TheStreet) -- Archer Daniels Midland Co. (ADM) is said to be close to a $3.4 billion purchase agreement with the privately held Wild Flavors Inc., Bloomberg reports.

Archer Daniels, a company engaged in the processing of oilseeds, corn, wheat, cocoa, and other agricultural products, outbid its Japanese competitor Ajinomoto Co. (AJINY) for Wild Flavors, a manufacturer of flavors, colors, and health-conscious food and beverage ingredients.

The deal is not yet public but an announcement regarding the merger could be made in the next few days, sources told Bloomberg.

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The merger would help Archer Daniels meet the growing consumer demand for the use of natural materials in concentrates, colorings, and confectionary ingredients.

Shares of Archer Daniels Midland are up by 0.97% to $45.76 in late-morning trading on Thursday.

Separately, TheStreet Ratings team rates ARCHER-DANIELS-MIDLAND CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARCHER-DANIELS-MIDLAND CO (ADM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, ADM's share price has jumped by 30.82%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • ADM's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
  • ARCHER-DANIELS-MIDLAND CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ARCHER-DANIELS-MIDLAND CO reported lower earnings of $2.03 versus $2.08 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $2.03).
  • ADM, with its decline in revenue, slightly underperformed the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: ADM Ratings Report
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