CPPIB buys 40% stake in Glencore Agri

The investment in the commodity processor follows Glencore’s aquisition of Canadian grain handler Viterra in 2012, and values Glencore Agri at $6.25bn.

The Canada Pension Plan Investment Board (CPPIB) has agreed to buy 40 percent of commodities processor Glencore’s agricultural business.

The transaction, which values the equity in Glencore Agri at $6.25 billion, is expected to close in the second half of this year, according to a press release issued by the investor.

Glencore’s agricultural operations include production, storage, transport and marketing of grain, oilseeds, cotton and sugar. The company acquired Canadian grain handler Viterra for $6 billion in 2012.

CPPIB’s global head of private investments Mark Jenkins suggested that the investment will be long term: “As an asset class, agriculture is an excellent fit for a long-term investor like CPPIB,” he said in a statement. The pension launched an agricultural platform in 2012 that includes farmland in the US and the Saskatchewan province Canada.

The investment means that CPPIB will be able to appoint two directors to Glencore Agri’s board.

Proceeds from the transaction will be used by Glencore to reduce its debt, according to the commodities processor and trader. The investment is expected to eventually enable Glencore Agri to expand in the US and Latin America.

“With the investment potential created by this partnership, and given the existing network of high-quality origination, logistics and port assets in key export regions, the business is now well-placed to take advantage of the significant opportunities that are expected to emerge across the sector in the coming years,” Glencore Agri chief executive officer Chris Mahoney said in a statement.

Reports that the company was looking to sell a minority stake in its agriculture business emerged in September last year. The sale is also part of an effort to reduce a debt burden that once sat at roughly $30 billion amid a crash in commodities prices. As of December last year, Glencore Agri had long-term debt of $0.6 billion and working capital of $3.0 billion which it intends to finance with short term debt on closing the new transaction, according to a statement from Glencore.

CPPIB was among a short list of prospective buyers said to be under consideration to take on a minority stake in the company in January. Other potential buyers included the Saudi Arabian Livestock Investment Company, which bought Canada’s former Wheat Board in a joint venture last year, and the sovereign wealth funds of Qatar, Singapore and Abu Dhabi, according to reports.

CPPIB has $366.28 billion in assets under management.

 

Chuck Stanley contributed reporting.