Agri trading M&A heats up

25 Jun

The agricultural-trading industry is being redrawn and North America, traditionally known as the bread basket of the world, continues to be a centre point as demand for food and animal-feed in developing countries including China surges.

Marubeni Trading, the Japanese agricultural goods trader, recently bought U.S. grain merchandiser Gavilon Group for USD 5.6 billion- the biggest Japanese acquisition this year and the seventh biggest globally close on the heels of Swiss-based Glencore purchasing Viterra in March for $6 billion .

In the next marketing year that starts in October, the market is expecting a 60 percent jump in China’s corn imports to around 8 million tonnes.

Analysts expect China’s corn purchases to surpass Japan’s annual imports of 16 million tonnes, which is the world’s largest at the moment.

The Marubeni deal is seen in particular boosting Marubeni’s ability to supply US corn and soybeans to the burgeoning Chinese market – a trade route in which it already has a significant presence. Glencore said in March that global grain and oilseed demand will increase as much as 3.5 percent a year.

“It’s a trend that’s been developing over the last five years that’s been accelerating,” Farha Aslam, a New York-based agricultural analyst for investment bank Stephens  told Bloomberg News. “The desire is to broaden the supply, broaden the reach and increase the depth across the globe.”

There are several deals in the pipeline and there may be further acquisitions in the trading industry: Margarita Louis-Dreyfus, the chairman of agricultural company Louis Dreyfus Holding, was cited by Les Echos on May 15 as saying that that the trader is being prepared for a possible IPO. She also isn’t ruling out a merger, the newspaper reported. The Amsterdam-based company said May 1 it agreed to acquire Sugar Land, Texas-based Imperial Sugar for $77.6 million to expand into refining and distribution of the sweetener. Louis Dreyfus recently announced its taking small stake in $3.1 billion Felda IPO

Then there is there is the possibility of a takeover of Australia’s GrainCorp which operates seven of the eight ports that ship grain in bulk from the country’s east coast. It is “inevitable,” Tim Mitchell, an analyst at Citigroup, said in a recent note to clients.

Closely held Gavilon drew interest from Singapore-based Wilmar International Ltd. the world’s largest palm-oil processor, as well as Bunge of the U.S., Switzerland’s Glencore, and Japan’s Mitsui and Mitsubishi, Bloomberg News reported.

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Posted by on June 25, 2012 in Agriculture


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