Glencore unit expands U.S. grain trading in US$1.1B deal

Glencore Plc’s Viterra unit agreed to buy the grains business of Gavilon Group, making good on a longstanding goal to grow in the U.S. as the commodity giant assesses the future of its agriculture operations.

Glencore Plc’s Viterra unit agreed to buy the grains business of Gavilon Group, making good on a longstanding goal to grow in the U.S. as the commodity giant assesses the future of its agriculture operations.

Glencore has been looking for years to grow its agriculture business to break the century-long dominance of the industry held by the so-called ABCD quartet -- Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. New Chief Executive Officer Gary Nagle said in December the company was reviewing opportunities to unlock more money from the unit. 

“The acquisition of Gavilon firmly establishes Viterra in the important U.S. grains and oilseeds markets,” Nagle said on Wednesday. “Viterra is now present in all major agricultural origination regions of the world. This will enable the company to take advantage of structural opportunities across global agricultural markets.”

Viterra will acquire the Gavilon grains and ingredients business from rival trader Marubeni Corp. for US$1.13 billion plus working capital. Buying Gavilon will give Viterra a significant agriculture footprint in the world’s largest grain shipper, after largely being concentrated in countries like Canada and Australia. Gavilon has assets throughout the Plains and Midwest, as well as indirect minority ownership in two West Coast port terminals which offer a gateway to Asia.

The deal may spur questions about Glencore’s future plans for the agriculture business. The company sold almost half of the unit to the Canada Pension Plan Investment Board and British Columbia Investment Management Corp. five years ago, and has since rebranded it as Viterra -- the name of a Canadian crop handler it acquired in 2012. Analysts have speculated that Glencore could either further sell down the unit or spin it off in a public listing. 

The company has also long been on the hunt for assets in the U.S. grain industry, including an unsuccessful approach to rival Bunge Ltd. in 2017, but hadn’t inked a major deal since the Viterra purchase.