Glencore eyes US grain traders for next big takeover | Fin24

Glencore eyes US grain traders for next big takeover

Feb 24 2017 09:19
Javier Blas

London - After striking deals in Russian oil and Congolese copper mining, Glencore set its sights on the US grain-trading industry.

The company sold half of its agriculture division to two Canadian pension funds for $3.1bn last year to fund an aggressive debt-reduction plan. Now, with cash levels rebounding and support from new partners for acquisitions, the Swiss commodities trader is planning to enter the US market.

"We want to grow in agriculture," Chief Executive Officer Ivan Glasenberg told Bloomberg News on Thursday after reporting better-than-expected annual results and lower debt.

“We want to fill a gap in the US.”

Glencore is looking at multiple options, including buying US assets such as export terminals and inland silos, or acquiring a complete business, according to people familiar with the matter, who asked not to be identified because the internal deliberations are private.

Gavilon Group, a grain merchant owned by Marubeni, would be a good fit, they said.

"Gavilon has no interest in being purchased and is not exploring any opportunity to be purchased," the company said in an e-mailed statement.

Glencore’s growing appetite for deals comes as it completes a turnaround from the commodities crisis, which forced the company to sell shares at the bottom of the market in 2015 and stop paying a dividend.

Since December, Glencore has joined forces with Qatar’s sovereign wealth fund to buy an $11bn stake in Rosneft PJSC and reached an almost $1bn deal to boost ownership of two Congolese cobalt and copper mines. Gavilon, an Omaha-based trader with 140 grain locations across the US, runs a medium-sized operation that would give Glencore a strong foothold in the American market.

Marubeni bought the company in 2013 for $3.6bn from several hedge funds investors including George Soros, and took a writedown on its investment in 2015.

Small grain traders, such as Scoular, The Andersons and Lansing Trade Group, are unlikely to appeal to Glencore because they don’t have enough firepower to compete in North America, the people said.

Glencore would face strong competition in the US, which is dominated by the ABCD group, which stands for the initials of Archer-Daniels-Midland, Bunge, Cargill and Louis Dreyfus. Glasenberg is also exploring buying some of their assets, the same people said.

The "timing is good" for buying grain-trading assets, Chris Mahoney, who heads Glencore’s agriculture division, said on Thursday.

“Infrastructure is the key to the business,” he said. "You can’t trade in the agriculture space without big infrastructure. So, we need to buy infrastructure.”

Glencore built its agriculture unit, which trades anything from wheat to olive oil, through a mix of acquisitions and organic growth, starting with the purchase of Dutch grain trader Granaria Group in 1982.

It bought Canadian grain handler Viterra for C$6.1 billion ($4.8bn) in 2012 and later sold some parts, such as pasta processing, and kept key grain infrastructure and trading.

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