- Commodity trader to pare down expansion after decade of growth
- Seeking partners for metals, orange juice, dairy, fertilizer
Louis Dreyfus Commodities BV, one of the world’s largest agricultural trading houses, is seeking joint-venture partners for units deemed outside its core business as the 164-year-old firm pares down investment after a decade of rapid growth.
Led by billionaire Margarita Louis-Dreyfus, who controls the company through a family trust, the closely held firm is looking for strategic investors in business lines including metals, orange juice, dairy and fertilizer, according to three people familiar with the matter who spoke on condition of anonymity because the plans have not been made public. Credit Suisse Group AG has been appointed to seek options for the fertilizer unit and Dreyfus isn’t considering an outright sale for any of the four businesses, two of the people said.
The dairy, fertilizer, orange juice and metals businesses will be ring-fenced from the rest of the company, which will focus on grains, oilseeds, cotton, sugar and coffee, the same people said.
A Louis Dreyfus spokeswoman declined to comment.
Some of the four units already operate separately. The metals unit, for example, is an independent company wholly owned by Dreyfus with its own credit lines from banks.
If successful, the potential partnership deals -- part of a strategic plan known internally as ‘Vision 2025’ -- will mark a dramatic change of tack for Louis Dreyfus Commodities, which controls about 10 percent of global agricultural-product trade flows. The joint ventures could involve the sale of stakes for cash or shareholding swaps with other companies, such as dairy and juice distributors. Dreyfus, as the company is known, is seeking industry partners that could help improve the units rather that financial investors.
Following an aggressive expansion in Black Sea region grains and oilseeds as well as sugar in Brazil, billionaire controlling shareholder Louis-Dreyfus is no longer interested in growth for its own sake amid global economic uncertainty, two of the people said. The company, which at its peak invested up to $1 billion a year expanding its business, plans to pare spending to about $300 million to $400 million, the same people said. Capital expenditures already fell to $592 million in 2014.
Dreyfus is seeking to shore up its finances amid a lack of clarity in the direction in the global economy, competition from new rivals and a slowdown in growth from China, the biggest raw materials consumer, the people said.
Dreyfus increased investments in assets during the past five years amid rising demand for food commodities from Asia, Africa, Russia and Eastern Europe. Sales rose to $64.7 billion in 2014 and net income increased to $648 million in 2014. Profit hit $1.1 billion in 2012 amid record prices.
The plan to secure joint-venture partners for the non-core business units comes as Russian-born Louis-Dreyfus also considers selling a minority stake of about 16 percent in the trading house to outside investors. The 53-year-old is weighing options to finance the buyout of a group of remaining family members and is open to “a potential minority partnership with external investors,” her family trust, Akira BV said in a statement in November.
Louis-Dreyfus is currently worth $3.9 billion according to Bloomberg estimates. She has tightened her grip on the family business once run by her husband Robert, who died in 2009. She has increased her stake in holding company Louis Dreyfus Holding BV, that controls the commodity business, to 81 percent from 50 percent in 2008, according to company filings.
Louis Dreyfus Holding owns about 90 percent of the trading house, with the rest held by employees of Louis Dreyfus Commodities, according to its website. The holding company had an equity value of $6.2 billion in 2014.
The trading company, founded in 1851 by grain trader Leopold Louis-Dreyfus, is seeking to weather a slump affecting the wider agriculture sector. The company, which has trading operations in Geneva, Singapore and the U.S., said Sept. 29 that first-half profit dropped 50 percent.
The firm named Gonzalo Ramirez chief executive officer in September, while Louis-Dreyfus took over as non-executive chairman. The company had been searching for a permanent CEO since April 2014.