Glencore Hunts Among U.S. Grain Traders for Next Takeover

Updated on
  • Small grain traders unlikely to appeal to Glencore, people say
  • Glencore’s head of agricuture says time is right for deals

After striking deals in Russian oil and Congolese copper mining, Glencore Plc has set its sights on the U.S. grain-trading industry.

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

Glencore shares slipped 1.1 percent to 327.70 pence as of 9:07 a.m. in London after touching a two-year high on Thursday.

Glencore is looking at multiple options, including buying U.S. 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 LLC, a grain merchant owned by Marubeni Corp., 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 $11 billion stake in Rosneft PJSC and reached an almost $1 billion deal to boost ownership of two Congolese cobalt and copper mines.

Read more: Glencore signals big dividend for long-suffering investors

Gavilon, an Omaha-based trader with 140 grain locations across the U.S., runs a medium-sized operation that would give Glencore a strong foothold in the American market. Marubeni bought the company in 2013 for $3.6 billion from several hedge funds investors including George Soros, and took a writedown on its investment in 2015.

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

Glencore would face strong competition in the U.S., which is dominated by the ABCD group, which stands for the initials of Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. 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, explaining that the "industry is ripe for consolidation."

“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. I think to succeed, you need to have the right scale, something in the U.S. would be good."

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 Inc. for C$6.1 billion ($4.8 billion) in 2012 and later sold some parts, such as pasta processing, and kept key grain infrastructure and trading.

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

(Updates with share price in fourth paragraph; quotes from Chris Mahoney in third to last.)
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