Mitsubishi to Consider Bid for Gavilon to Gain U.S. Grain

Mitsubishi Corp. (8058) and Marubeni Corp. (8002), Japan’s top and fifth-biggest trading companies, are considering making independent bids for U.S. grain handler Gavilon Group LLC, according to people with knowledge of the matter.

Mitsubishi, based in Tokyo, made an initial approach last month after Gavilon began looking at a sale in January, said one person, who asked not to be named because the offer is private. Marubeni may also make an offer, said another person who has direct knowledge of the process. The Omaha, Nebraska-based company may fetch as much as $5 billion, people familiar with the matter said March 6.

Tokyo-based Mitsui & Co., Baar, Switzerland-based Glencore International Plc (GLEN), Bunge Ltd. (BG) and Wilmar International Ltd. (WIL) are among companies that have shown interest in Gavilon, according to people with knowledge of the matter. The closely held company controls one of the world’s largest fertilizer distribution networks, as well as the third-biggest U.S. grain-merchandising operation, according to its website.

“The U.S. is the largest corn producer so to control Gavilon means you’ll have a slice of U.S. supply and possibly rising exports to China,” Ben Santoso, a commodities analyst at DBS Vickers Securities (Singapore) Pte., said by phone from Singapore. “Mitsubishi may want to expand their market share.”

Commodity traders are seeking to tap rising demand for food, driven by population and economic growth in countries including China, India and Indonesia. Glencore, which last month agreed to buy Canada’s Viterra Inc. (VT) for C$6.1 billion ($6.2 billion), expects Asian consumption to drive annual growth of as much as 3.5 percent in global grain and oilseed demand.

Triple Trade

Buying Gavilon would almost triple Mitsubishi’s grain trade to about 27 million metric tons a year, exceeding rival Marubeni’s 22 million tons. The company already has a plan to double its volumes to 20 million tons by 2015.

Mitsubishi is “very interested in increasing trading volume in China and Asian markets,” Akira Kishimoto, an analyst with JPMorgan Securities Japan Co. said from Tokyo. “They are relatively aggressive in terms of acquiring these food traders globally.”

Mitsubishi closed down 0.6 percent to 1,772 yen in Tokyo, trimming its gain for the year to 14 percent. Marubeni declined 0.2 percent to 564 yen.

Mitsubishi, Marubeni and Mitsui spokesmen wouldn’t comment when contacted by phone today and they declined to give their names for publication, citing company policy. A voice mail message left at Gavilon’s office in Omaha after hours wasn’t immediately returned.

‘New Player’

Gavilon is more likely to be acquired by a “new player” in the U.S. agriculture industry than an established company because of antitrust concerns, rival Cargill Inc.’s Vice Chairman Paul Conway said last month.

Cargill dominates the U.S. grain market along with Archer Daniels Midland Co. and Bunge. While the Minneapolis-based company likes parts of Gavilon, it can’t buy the whole business because to do so and then sell off unwanted assets may lead to tax costs and regulatory risks, Conway said in a March 22 interview.

Wilmar, Mitsui and Viterra, which subsequently agreed to the deal with Glencore, and Bunge were exploring offers for Gavilon, people familiar with the matter said last month.

Wilmar, the world’s largest palm oil trader, spoke with Gavilon last year about a purchase without sealing a deal, according to one person. Gavilon is working with Morgan Stanley to review options including a sale, a person familiar with the matter said in January.

Grains, Energy

Gavilon’s businesses include sourcing energy, fertilizer and grains, according to its website. As well as storing commodities, the company arranges transportation and employs 2,000 people in 300 locations in six continents.

The U.S. company took its current form when ConAgra Foods Inc. (CAG) sold its trading and merchandising operations for about $2.75 billion, including debt, to Ospraie Management LLC, the hedge-fund firm founded by Dwight Anderson, Soros Fund Management LLC and private-equity firm General Atlantic LLC in 2008. Anderson formed Ospraie in 2004 after working with Tudor Investment Management, the Greenwich, Connecticut-based hedge- fund firm run by Paul Tudor Jones. ConAgra had acquired Gavilon predecessor Peavey Co. in 1982.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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