April 7, 2016

Glencore to sell 40% stake in agricultural unit

Glencore PLC will sell a 40% stake in its agricultural business to Canada Pension Plan Investment Board (CPPIB) for US$2.5 billion.

The decision is made to help mitigate the commodities organisation's close to US$26 billion net debt. Under the terms of the new agreement, the agricultural unit will be led by its own board, including two CPPIB representatives and three from Glencore.

In addition, both parties have agreed to keep their respective unit stakes for at least four years. Glencore maintains its prerogative to sell an additional 20% stake in the unit.

Glencore and Canada Pension Plan are required to give the other first refusal on any future unit share sales. They could also call for an initial public offering of the unit after eight years from the formalisation of the deal.

The agreement could conclude by the second half of 2016. It will partially unwind Glencore's acquisition of Canadian grain handler, Viterra Inc. which was bought at US$6.2 billion.

Glencore's stock price had declined in recent times during a selloff on commodities, a key reason for its burdensome debt. Performance of its shares is still uncertain as they tumbled 50% over the past year.

The agricultural unit has been valued at an equity amount of US$6.25 billion.

- The Wall Street Journal