Archer Daniels' Inadequate Wilmar Share Holdings Disclosure

Includes: ADM, WLMIF
by: George Gutowski

Archer Daniels Midland Company (NYSE:ADM) will contribute its direct holdings in its Wilmar-related agriculture processing joint ventures in China to Wilmar International Ltd. (OTCPK:WLMIF) in exchange for shares in Wilmar. Wilmar is a publicly-traded company on the Singapore Exchange Limited with a U.S. pink sheet listing.

Wilmar is considered by many to be the largest agribusiness group in Asia. (Wilmar 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. Because Wilmar trades in Singapore, it is subject to governance standards that differ from North America. Kuok is a private group. Many assets are in China. Much of Wilmar’s products revolve around Palm Oil which is reviled by nutritionists.

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

ADM 1-yr chart:

ADM 1-yr chart