MERGERS, ACQUISITIONS, JOINT VENTURES, AND CONSOLIDATIONS IN AGRIBUSINESS: AN EXAMPLE OF ACQUISITION (ACQUISITION OF CONTINENTAL GRAIN BY CARGILL)

Abstract

In November 1998, Cargill, Inc. announced that it was going to acquire the grain business of Continental Grain Company. At that time, Cargill was the largest privately held company in the United States and Continental Grain was number five. If the acquisition was to be approved by the authorities, the transaction would lead to Cargill having both a monopoly and a monopsony in the U.S. grain market. During the recent years leading up to this event, highly intensive global competition conditions had strained Continental Grain s sales and market share. Both Continental s and the United States grain export positions were in jeopardy due to competition from overseas and South American countries. The managers of Cargill realized that the same thing could happen to that company. The acquisition would make Cargill stronger by using Continental s high-fixed cost production system to capture economies of scale. At the same time, it seemed too late for Continental to solve its diversification of products problem, which required both large capital investments and time to develop. To be acquired by Cargill seemed to be the best choice for Continental Grain, because Cargill had what Continental needed.