Glencore to sell 40% stake in agribusiness to CPPIB

Anglo-Swiss mining and commodity company Glencore has entered into a definitive agreement with the Canada Pension Plan Investment Board (CPPIB) to sell a 40% stake in its agricultural business to a wholly-owned subsidiary of CPPIB.

The sale of the stake by the company, which has been struck by falling prices of commodities, is expected to raise $2.5bn payable in cash upon closure of the transaction.

The sale is a part of Glencore’s restructuring programme, designed to reduce its debt of $30bn last year.

Glencore Agri CEO Chris Mahoney said: "With the investment potential created by this partnership, and given the existing network of high-quality origination, logistics and port assets in key export regions, the business is now well-placed to take advantage of the significant opportunities that are expected to emerge across the sector in the coming years."

The sale values the agricultural unit of the company as a whole at close to the initially expected $10bn that included $0.6bn in debt and $2.5bn in inventories.

Expected to close by the second half of this year, the transaction is subject to customary regulatory approvals and closing conditions.

The Glencore Agri business comprises over 200 storage facilities across the globe, along with 31 processing facilities and 23 ports.

These facilities help the business in the trade of major agricultural commodities that include rice, sugar, grains, oilseeds, and cotton.

Last year, Glencore Agri reported core earnings of $524m, and on 31 December 2015, the business had gross assets of $10.1bn.

Under the terms of the agreement, Glencore can further sell up to 20% of its shares.

Glencore and CPPIB intend to call for an initial public offering of Glencore Agri after eight years from the date of closing.

CPPIB Private Investments senior managing director and global head Mark Jenkins said: "As an asset class, agriculture is an excellent fit for a long-term investor like CPPIB, and we are excited about the opportunity to acquire a significant stake in Glencore Agri, a leading agricultural business."

After the closing, Glencore Agri will continue to be governed by its CEO and a board that will have two directors each from CPPIB and Glencore.