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Glencore to sell stake in agri business to CPPIB for US$2.5b
[BENGALURU] Miner and commodity trader Glencore said it had agreed to sell a 40 per cent stake in its agricultural business to Canada Pension Plan Investment Board (CPPIB) for US$2.5 billion and use the proceeds to reduce debt, which is among the highest in the sector.
Glencore's net debt has increased to about US$30 billion as of February as commodities prices hit multi-year lows and markets have been concerned the high debt levels could compromise the Swiss company's ability to run its trading unit effectively.
Glencore said on Wednesday it expects the deal, which values Glencore Agri at US$6.25 billion, to close during the second half of 2016 and eight years after that either CPPIB or Glencore could move to take the business public.
The Swiss company said Glencore Agri would be run by Chris Mahoney and a board to which CPPIB and Glencore would each appoint two directors.
Reuters reported in October that Glencore was in talks with a Saudi Arabian sovereign wealth fund, China's state-backed grain trader COFCO and Canadian pension funds to sell a stake in the agricultural business.
The Wall Street Journal on Tuesday said CPPIB, one of the world's biggest pension funds, likely won that auction.
Barclays, Citi and Credit Suisse were Glencore's joint financial advisers and Linklaters LLP provided legal advice.
Glencore's shares were up nearly 2 per cent at 144.6 pence at 0745 GMT, after rising as much as 2.37 per cent in early morning trade on the London Stock Exchange.