This alert focuses on mergers and acquisitions in the ‘soft’ commodities arena. It is the second in a series addressing issues commonly faced when undertaking M&A transactions in the energy and commodities sector. 

The first alert in this series covered the key issues relevant to acquiring business assets and trading portfolios across the energy and commodities sector, and may be accessed here.

In this article, we have focused on certain headline issues arising in relation to asset acquisitions in soft commodities. ‘Softs’ are generally considered to be agricultural in nature from crops, such as wheat, coffee, soya beans and sugar. Softs may be contrasted with ‘hard’ commodities, which are generally considered to be those that are mined, including iron ore, coal and precious metals. Recent acquisition and merger activity in this space – along with commentary on the increasing role of speculative trading on food prices and security – has raised the profile of this sector. Back in 2015, Olam International acquired the ADM worldwide cocoa business. In 2016, Cargill sold two of its oilseed proceedings plants and businesses to Bunge, and more recently, in February 2017, the Chinese trading house COFCO acquired the Dutch grain trader Nidera, following their earlier purchase of the Noble Agribusiness.

Many of the potential issues that should be taken into account when conducting due diligence in relation to a new asset – for example, the ownership structure – will remain pertinent with any business acquisition. However, the soft commodities sector has its own specific peculiarities which also should be considered when investing in any agribusiness asset. We have identified 10 key issues in the table below.

Click here to view the table. 

Client Alert 2017-203