A Canadian pension fund will buy 40 percent of Glencore’s agriculture products business, the global commodities firm said in a statement.
It said the Canada Pension Plan Investment Board (CPPIB) will pay an aggregate consideration of US$2.5 billion in cash for the stake purchase, which is subject to customary working capital closing adjustments.
“The transaction values 100% of the equity in Glencore Agri at $6.25 billion. As at 31 December 2015, the business had long-term debt of $0.6 billion and working capital (net of cash) of $3 billion (including readily marketable inventories of $2.5 billion) which it intends to finance with short-term debt on closing,” Glencore said.
It said the transaction is subject to customary regulatory approvals is expected to close during the second half of 2016. The proceeds from the deal will be used by Glencore to reduce its debt.
Glencore Agri is a differentiated and vertically integrated business focused on the global agricultural products value chain. Built around a network of high-quality origination and logistics assets, comprising over 200 storage facilities, 31 processing facilities and 23 ports in strategic locations around the world, Glencore Agri is well-positioned in key export regions and in the trade of major agricultural commodities including grains, oilseeds products, rice, sugar, pulses and cotton.
In the year to 31 December 2015, Glencore Agri reported earnings before interest and tax of $524 million, and at 31 December 2015 had gross assets of $10,187 million.
Upon closing, Glencore Agri will be governed by its own board of directors. CPPIB shall have the right to appoint two directors to the Board of Glencore Agri alongside two Glencore-appointed directors and the CEO, Chris Mahoney.