June 21, 2016

Sale of 9.99% stake in Glencore Agricultural Products to bcIMC

 

Glencore has announced that it has entered into a definitive agreement with British Columbia Investment Management Corporation (bcIMC) for the purchase of a 9.99% stake in Glencore Agricultural Products for an aggregate consideration of US$624.9 million payable in cash upon closing.

The transaction values 100% of the equity in Glencore Agri at US$6.25 billion, after taking into account indebtedness that the business is anticipated to have at closing.  This transaction is in addition to the sale of a 40% stake in Glencore Agri to Canada Pension Plan Investment Board for US$2.5 billion, which was announced on April 6. Glencore will then hold a 50.01% stake and the business will continue to be run by the existing management team.

bcIMC will be able to appoint one director to the board of Glencore Agri and will be granted certain reserved matter rights consistent with its shareholding. All the other details contained in the April 6 announcement will continue to apply.

It is also anticipated that at closing of this transaction all of Glencore Agri's debt (which currently totals approximately US$3.6 billion and most of which is currently funded by Glencore) will be assumed by Glencore Agri. It is expected that this financing, currently comprising around US$0.6 billion of long term debt and US$3 billion of short term debt for financing of working capital, will ultimately be funded by Glencore Agri without recourse to Glencore.

This transaction is subject to customary regulatory approvals and closing conditions and is expected to close during the second half of 2016.

The US$3.124 billion of cash proceeds from these two transactions will be used by Glencore to reduce net indebtedness. As a result of the two Glencore Agri transactions and the sale of Komarovskoe for US$100 million, Glencore has entered into definitive agreements on asset disposals totaling US$3.2 billion of its US$4-5 billion target for 2016.

Commenting on this transaction, Ivan Glasenberg, CEO of Glencore, said: "We are pleased to welcome another long-term partner into Glencore Agri who shares our vision to capture the significant opportunities we believe will emerge for Glencore Agri over coming years. These transactions highlight the superior value of Glencore Agri, with its advantaged asset footprint and business model, relative to its closest peers. We are very excited that Glencore, as the largest shareholder in the business, will benefit from continued growth of the business with our new partners."

Commenting on this transaction, Lincoln Webb, senior vice president (Infrastructure & Renewable Resources) of bcIMC, said: "Our investment in Glencore Agri provides an excellent opportunity for bcIMC to increase and diversify our exposure within the agricultural space, a sector we view as critical to supporting rising levels of global prosperity. Investing with strong partners and alongside a world-class management team, we believe our long-term investment views and global perspectives align well with the further growth and development of a leading agricultural platform."

Barclays, Citi and Credit Suisse acted as joint financial advisers to Glencore. Linklaters LLP provided legal advice to the company.