Thursday, December 14, 2006

ADM's Inadequate Asian Disclosure

Archer Daniels Midland Company (NYSE: ADM - News) will contribute its direct holdings in its Wilmar-related agriculture processing joint ventures in China to Wilmar International Ltd. (WIL) in exchange for shares in WIL. WIL is a publicly-traded company on the Singapore Exchange Limited (SGX).

Wilmar will be considered by many to be Asia’s largest agribusiness group in Asia. (WIL also plans to acquire the worldwide oilseed-related assets of Wilmar Holdings Pte. Ltd. and merge with the Kuok Group in presumably the very near future) Its stock has nearly doubled in the past year. 05 net income was approximately US $58 million.

ADM will become the second largest shareholder. Presumably Kuok will be the largest although the press release was silent on this point. Given ADM’s relative size Wilmar seems financially insignificant. The play is obviously the future. However no financial information has been provided by ADM as to the future impact. Not even the bland comment about a possibly accretive effect at some point in the future.

ADM did the deal because they think it’s a good idea. Wil trades in Singapore and is subject to governance standards that differ from North America. Kuok is a private group. Many assets are in China. Much of Wil’s products revolve around Palm Oil which is reviled by nutritionists.

ADM can you provide some more colour, connect a few dots and maybe explain how this is going to work out. I am not saying its bad financially. But it would be really good to understand the investment