|
 The sale values the agricultural unit as a whole at close to the
initially expected $10 billion, including $0.6 billion in debt and
$2.5 billion in inventories, and comes after Glencore said last
month it was stepping up its debt reduction plan by unloading more
assets.
The group said it aimed to cut net debt to between $17 billion and
$18 billion by the end of 2016, $1 billion more than previously
planned and down from a peak of $30 billion last year.
The purchase is by the pension fund's investment unit, Canada
Pension Plan Investment Board (CPPIB), which seeks long-term
low-risk investments.
"Glencore Agri complements our existing portfolio of agriculture
assets, bringing global exposure, scale and diversification,"
CPPIB's global head of private investments, Mark Jenkins, said in a
statement.
Glencore's stock had collapsed to below 70 pence at the end of last
year, a fraction of its peak of 556 pence following its 2011
flotation, due to investor worries over its heavy debts coupled with
slumping copper and coal prices.
INVESTMENT GRADE
The stock has, however, doubled in value since then, after the
company took steps to cut debt and protect its investment- grade
credit rating, by raising money via a share issue, reducing
inventories, suspending dividends and selling assets.
"Management continue to be proactive and delivering on the stated
objective of reducing debt," said Charl Malan, portfolio manager at
investor and Glencore shareholder Van Eck Associates.
Malan said that he expects Glencore to continue to drive debt lower
via asset sales, metal streaming deals and improved operating
efficiencies.
Glencore expects the agriculture deal to complete in the second half
of 2016. The business comprises more than 200 storage facilities
globally, 31 processing facilities and 23 ports, allowing Glencore
to trade grains, oilseeds, rice, sugar and cotton.
[to top of second column] |
It generated core earnings of $524 million in 2015 and had gross
assets of more than $10 billion.
Under the agreement, Glencore has the right to sell up to a further
20 percent stake. Glencore and CPPIB may also call for an initial
public offering of Glencore Agri after eight years from the date of
completion, the companies said.
Glencore Agri would be run by current chief Chris Mahoney and a
board to which CPPIB and Glencore would each appoint two directors.
Shares of Glencore rose as much as 2.2 percent on the announcement
of the disposal, before retreating to trade 4.5 percent down by 1236
GMT (8.36 a.m. ET). The FTSE was up 0.6 percent.
"The more assets Glencore disposes of, the more shareholders will
begin to weigh up the benefits to the balance sheet versus the
negatives of lost future revenue," said Jasper Lawler, market
analyst at CMC Markets.
Barclays, Citi and Credit Suisse were Glencore's joint financial
advisers and Linklaters LLP provided legal advice. Deutsche Bank was
sole financial advisor to CPPIB.
(Additional reporting by Sarah McFarlane and Alistair Smout in
London, Noor Zainab Hussain and Vidya L Nathan in Bengaluru; Editing
by David Holmes and David Evans)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
