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Exclusive: Cargill explores purchase of ADM's cocoa unit - source

A logo is pictured on the building of Cargill International SA in Geneva August 4, 2009. REUTERS/Denis Balibouse
A logo is pictured on the building of Cargill International SA in Geneva August 4, 2009. REUTERS/Denis Balibouse

By Josephine Mason

NEW YORK (Reuters) - Cargill Inc , one of the world's leading cocoa traders, has explored the possibility of buying Archer Daniels Midland Co's cocoa business, a source familiar with the situation said, a purchase that would create a global giant in the sector.

Privately held Cargill performed due diligence on the ADM business last month, the source said.

It is unclear whether Cargill, one of the world's biggest argibusinesses, has placed a bid for ADM's unit, which is estimated to be worth $2 billion, or that it intends to do so.

Combining two of the world's top cocoa merchants and bean grinders would create a company big enough to compete with Zurich-based Barry Callebaut , the world's biggest maker of industrial chocolate products.

ADM declined to comment beyond its bare-bones statement in June that it was in discussions about a potential sale of the business.

A spokesman for Cargill would not comment on the company's ADM interest but said in an email the company continues to assess initiatives.

Barry Callebaut on Monday sealed its $860 million acquisition of the cocoa ingredients division of Petra Foods .

ADM, Cargill and Barry Callebaut account for as much as 40 percent of world cocoa bean grinding capacity and also dominate exports from the top producing nations, according to a United Nations report on the global cocoa industry from 2008.

Just 10 companies account for two-thirds of global grinding, the report said.

For ADM, a sale would mark a shift toward the grains sector as it finalizes its $3 billion takeover of Australia's GrainCorp , the largest bulk grain handler on Australia's east coast.

Cargill, which runs cocoa plants in No. 1 growing region West Africa, Brazil, Indonesia and in major consuming countries in Europe has been investing in the sector.

It bought German cocoa grinder Kakao Verarbeitung Berlin in 2011 and in May began building a $100 million cocoa processing facility in Indonesia.

ADM has processing and manufacturing facilities in the United States, Ivory Coast, Ghana, Singapore and Brazil.

For Cargill, buying its rival would also be a bet on rising long-term demand as consumers in emerging markets develop a taste for chocolate.

But some analysts and bankers have cautioned that competition concerns would arise, particularly in Ivory Coast and Ghana, the world's top two growers. Both companies own processing facilities, which could prevent Cargill from making a bid.

"There's not a lot of people who could buy something of that size and not have antitrust issues," said a source familiar with the process.

(Additional reporting by Soyoung Kim; Editing by Steve Orlofsky)

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