6th Apr 2016 09:03
LONDON (Alliance News) - Miner and commodities trading house Glencore PLC on Wednesday said it has entered a deal to offload a substantial stake in its agricultural business to a Canadian pension fund, the latest step in the group's push to divest assets as it looks to reduce its debt pile.
FTSE 100-listed Glencore said it had agreed to sell a 40% stake in its Agricultural Products business to Canada Pension Plan Investment Board for USD2.5 billion, a deal which had been flagged by The Wall Street Journal on Tuesday.
The sale of the stake in the business values the agricultural arm, which handles wheat, corn, biofuels, cotton and sugar, at USD6.25 billion in total. Barclays, Citigroup and Credit Suisse advised Glencore on the sale.
Glencore also said it has entered into an initial four-year lock-up period with Canada Pension Plan Investment Board to sell up to 20% further stake in the business.
"We are pleased to be partnering with CPPIB as we embark on the next stage of the development of Glencore Agri. 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," said Ivan Glasenberg, Glencore's chief executive.
"CPPIB have a proven track record in the sector and share our vision for the future growth of the business through value-creating organic and inorganic growth opportunities for the benefit of all stakeholders," Glasenberg added.
Glencore, in line with other major miners, is restructuring its operations in order to reduce its debt pile and shore up its finances within a tough commodities sector environment. Glencore is targeting USD4.0 billion to USD5.0 billion in asset sales this year.
In its annual results, published in early March, Glencore said its net debt at the end of 2015 was USD25.88 billion, down from USD30.53 billion at the end of 2014 and just off the company's target to trim debt to USD25.00 billion by the end of 2015.
Since the year end, Glencore made strides on shoring up its financial position after it refinanced a substantial credit facility earlier than planned. Shares in the group added around 10% when it announced the refinancing in February as the refinancing indicated a vote of confidence from lenders for Glencore's plans.
Beyond the focus on cutting debt, Glencore on Wednesday indicated the sale of the stake to Canada Pension Plan Investment Board could position the agricultural business to make further acquisitions within the depressed market environment.
"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," said Chris Mahoney, the chief executive of Glencore Agri.
Glencore shares were down 0.2% to 141.67 pence on Wednesday, one of the worst performers in the FTSE 100.
By Sam Unsted; [email protected]; @SamUAtAlliance
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