The List of Those Interested in Glencore Agriculture Sale Grows
Last week, Oilseed & Grain News reported that CHS was considering acquiring the Canadian agricultural assets of Glencore as that company is selling off its agriculture unit as part of a restructuring strategy to reduce its debt load of $30 billion.
Since that time, Bloomberg reports that the list of interested parties in the assets has grown to include the sovereign wealth fund of Singapore, Japanese trading house, Mitsui & Co., and at least one Canadian pension fund.
Citigroup Inc., hired along with Credit Suisse Group AG to oversee the sale, announced in an analyst note that the whole business could be valued at as much as $10.5 billion. Under Glencore’s plan for the sale, it is considering a plan whereby the agricultural business would be carved out as a stand-alone company with its own capital structure to be incorporated in Singapore, where under taxation regulations, trading houses can see tax rates as low as 5%.
Singapore’s sovereign wealth fund, GIC, formerly Government of Singapore Investment Corp., has made previous investments in global commodity traders, at one point being the largest shareholder in U.S.-based Bunge Ltd. Mitsui & Co. has also made past investments in the Brazilian, Japanese, and U.S. agriculture sectors, while other Japanese trading houses such as Marubeni Corp. and Mitsubishi Corp. have invested billions of dollars in the sector in recent years.
Glencore originally became a major player in the commodities space when it acquired Canadian grain handler, Viterra Inc., for US$4.6 billion in 2012, however the company still lacks a presence in the U.S. market, and negotiations are currently underway as the company is working to counterbalance an equity market rout that has reduced its market value by more than 80% since its 2011 initial public offering (IPO).
The sale of its agriculture assets is part of a wider plan by Glencore to reduce its debt that includes selling $2.5 billion in new stock, spending cuts, and suspending the dividend. The targeted end-result is the reduction of debt from the current $30 billion to closer to $20 billion.