Glencore Studies Selling Stake in Agriculture Unit to Curb Debt

U.K. Wheat Harvest Using New Holland Agriculture Farming Machinery
Matthew Lloyd/Bloomberg
  • CFO Kalmin says company's agriculture assets are `desirable'
  • Buyers could take stakes in infrastructure or overall unit

Glencore Plc is considering selling a minority stake in its agriculture business as part of the Swiss miner and commodity trader’s wider plan to reduce its $30 billion of debt by about a third.

It could bring in investors in infrastructure assets in the agriculture unit including ports, rail and storage facilities, or even sell a minority stake in the overall business, Glencore Chief Financial Officer Steve Kalmin said. There’s been “quite a lot of interest” in food commodities from sovereign wealth funds in China and Japan, he said Monday in a phone interview.

A sale would mark a retreat by Glencore, less than five months after saying it sought to expand in agriculture following the success of its C$6.1 billion ($4.6 billion) purchase of Canadian grain trader Viterra Inc. in 2012. Viterra said just two weeks ago it would spend C$190 million on an oilseed processing plant. Asian traders and sovereign funds have spent billions in the industry in the past two years as growing populations boost food demand.

Glencore’s agriculture operations “are much more desirable assets and ones where we should be able to extract full value,” Kalmin said.

Asian Interest

Japan’s Mitsubishi Corp. last month agreed to buy a fifth of Olam International Ltd., a commodity trader controlled by Singapore’s state investment company, in two deals worth S$1.53 billion ($1.1 billion). Cofco Corp., China’s largest food company, spent $3.5 billion last year in an effort to build a global grain trader, acquiring controlling stakes in Noble Group Ltd.’s grains trading arm and Dutch trader Nidera BV.

Baar, Switzerland-based Glencore, one of the two biggest traders of wheat, handling about 18 percent of the world’s seaborne trade, said Aug. 19 that its adjusted earnings before interest, taxes, depreciation and amortization from agricultural products slumped by 46 percent in the first half from a year earlier as bumper crops pressured prices and reduced volatility.

The company, whose shares last week posted the biggest weekly drop in London since going public in 2011, on Monday said it would sell about $2.5 billion in new equities, along with assets worth as much as $2 billion. Glencore, among the top three agricultural exporters in Russia, the European Union, Canada and Australia, will also suspend dividend payments to help cut debt by about $10.2 billion.

The company competes for a spot among the so-called "ABCD", the informal acronym representing the biggest players in grain trading: Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Commodities BV.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director of Glencore.

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