Glencore has announced an agreement to sell $2.5 billion of its Agricultural Products to the Canada Pension Plan Investment Board, Canada’s largest pension fund.
Glencore Agricultural Products (GAP) have been sold off as the business had long term-debts of US$0.6 billion and working capital (net of cash) of US$3.0 billion which it intends to finance with short term debt on closing.
The move is part of its wider strategy to drive down debt levels of around US$8 billion at the company, and follows theannouncement of its intention to sell its rail haulage assets in the Hunter Valley.
According to Glencore Chief Executive Officer Ivan Glasenberg, Canada Pension fended off other bidders that included Asian and Middle Eastern sovereign wealth funds and the state-owned Saudi Agricultural and Livestock Investment.
“Under Glencore’s ownership the business has been successfully rebased, particularly following the Viterra acquisition in 2012 and is well-positioned to benefit from long-term global macro and sector trends,” Glasenberg said.
In addition, Glencore and Canada Pension have agreed to an initial four year lock-up period subject to a carve-out for Glencore to sell up to a further 20 per cent stake.
In 2012, Glencore became a major agriculture player when it agreed to buy Canadian grain. The company buys products from farmers, processors and other suppliers and sells to customers including local importers and government agencies.
The transaction caps three years of intense deal making in the agriculture industry. Glencore’s agriculture business, in Glasenberg’s view, is now “well placed to take advantage of the significant opportunities that are expected to emerge across the sector in the coming years.”