January 27, 2021

 

Marubeni set to sell Gavilon to Glencore arm for US$1.1 billion

 

 

Japan-based Marubeni Corp will sell the grains business of its US-based Gavilon to commodities trader Glencore PLC's Viterra arm for US$1.125 billion including working capital, Reuters reported.

 

Marubeni expects to receive about US$2.6 billion to US$3.5 billion for the sale, which includes loans to grains merchant Gavilon.

 

Marubeni will retain Gavilon's fertiliser business as well as some facilities for grain export.

 

The deal is set to be completed by March 31, 2023 subject to closing conditions and regulatory approvals

 

Since purchasing Gavilon for US$2.7 billion in 2013, Marubeni has booked a series of impairment losses, totalling JPY 120 billion (~US$1.045 billion; JPY 100 = US$0.87) because of weaker grain prices and market volatility.

 

Akira Terakawa, senior executive vice president at Marubeni, said they aimed to be a major global grains company through the expansion of trade volume, but the strategy failed because bigger volumes posed a higher market risk.

 

Terakawa said he company also struggled because the acquisition price was too high, adding that the Japanese managers found it difficult to control the Gavilon grain business.

 

Marubeni will reorganise its group operations before the sale. This includes a transfer of eight of the grain elevators held by Gavilon and located in northern United States to another US-based Marubeni unit, Columbia Grain International.

 

A joint venture export terminal business based on the US west coast owned by Gavilon will also be transferred to Columbia Grain International. Gavilon's fertiliser business will be transferred to Marubeni as well.

 

Marubeni said it will aim to further strengthen its grain business to meet Asian demand for grain, especially in Japan despite the sale. The company will also reinforce the handling of speciality crops and developing its processing and downstream businesses.

 

-      Reuters