Marubeni won the auction for US-based Gavilon, in a $5.6bn deal which make the Japanese trading house one of the world's largest grain dealer, besides the top importer of fertilizer into America.

Marubeni paid $3.6bn for the equity in Gavilon, the agricultural and energy trader being sold by shareholders including George Soros and hedge fund manager Dwight Anderson, and will take on a further $2bn in debt.

The acquisition, against competition from other Asian suitors believed to have included rival Japanese trading house Mitsui & Co and Singapore-listed Noble Group, brings Marubeni the third-ranked US grain trader, by capacity, and the top US importer of fertilizers, as well as a substantial energy business.

Indeed, Marubeni will become one of the world's largest grain traders, potentially eclipsing Cargill.

According to Japanese estimates, Marubeni handles some 22m tonnes of grain a year and Gavilon 20m tonnes, compared with 40m tonnes by Cargill.

Crops to Asia

Greg Heckman, the Gavilon chief executive, said that that deal would, in embedding the group into a "larger trading organisation", leave the Nebraska-based company "well-positioned to more efficiently connect supply with growing global demand".

Indeed, the 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.

Chinese imports will soar 40% to a record 7.0m tonnes in 2012-13, and its soybean purchases by 8.9% to an all-tile high of 61.0m tonnes, according to the US Department of Agriculture.

While Gavilon has expanded abroad, and for example opened a Kiev office last year, the group has maintained a domestic focus, boasting more storage in the US than trading groups such as Bunge and Louis Dreyfus, better known crop trading names internationally.

Gavilon also differs from the other major US grain traders in its lack of penetration into processing agricultural commodities, sticking with marketing, distribution and storage.

Ratings caution

Instead, Gavilon, ranked the 19th-largest US company by Forbes, has expanded instead into energy, a division which fuelled a cut by Standard & Poor's to "negative" in its rating outlook on the group.

The decision reflected concerns that Gavilon's "recently weak operating performance may continue, particularly in the company's energy trading segment, where profitable gas and crude oil storage and trading opportunities have been limited under current market conditions", the ratings agency said.

The group's ratio of adjusted debt to earnings before interest, tax, depreciation and amortisation (ebitda) rose to a relatively high 4.1 times in the year to the end of March.

Trade route

The deal represents the second foreign takeover of a major North American grain trader this year, after Swiss-based Glencore purchased Viterra in March for Can$6bn.

The purchases highlight the status of North America as a major source of grain exports to meet growing demand in particular in Asia.

However, unlike the Glencore-Viterra deal, Marubeni said on Tuesday it would not be following up its acquisition with disposals of much of the company.

The deal was revealed after the close of the Tokyo stockmarket, where Marubeni shares closed up 2.6% at 517 yen.


agrimoney