Qatar's Wealth Fund interested in Glencore Agriculture sale

[TORONTO] The sovereign wealth fund of Qatar has joined investors expressing an interest in buying a minority stake in Glencore Plc's agriculture business, according to three people familiar with the conversations.

The talks are preliminary and a sale would take as long as six months, said the same people, who asked not to be identified because the matter is confidential. Qatar Holding LLC, the direct investment arm of the Gulf state's sovereign wealth fund, is already the largest investor in the Swiss-based commodities trader-cum-miner, with an 8.9 per cent stake, people said earlier this week.

Others involved in preliminary talks with Glencore include the sovereign wealth fund of Singapore, Japanese trading house Mitsui & Co and Canada Pension Plan Investment Board, the country's largest pension manager.

Citigroup Inc, one of the banks hired to run the sale alongside Credit Suisse Group AG, said earlier this month that the whole business could be worth as much as US$10.5 billion. Glencore is seeking to sell a minority stake in the unit, which deals in commodities from wheat to cotton, soybeans to sugar.

As part of negotiations with potential buyers, the Swiss- based commodities trader is considering a plan that will carve out its agriculture business as a stand-alone company with its own capital structure, incorporating the unit in Singapore, the same people said. Under the island state's rules, commodity trading houses can benefit from tax rates as low as 5 per cent.

Glencore, Qatar and Canada Pension Plan Investment Board declined to comment. Singapore's GIC Pte declined to comment when Bloomberg first reported its interest on Oct 2, while a Mitsui spokesman said the company was "aware of Glencore's plan to sell certain businesses, but we have not come to a decision at the present." The sale of the agriculture business is part of a debt- cutting program that Glencore Chief Executive Officer Ivan Glasenberg announced in early September. The plan includes selling US$2.5 billion of new stock, asset sales, spending cuts and suspending the dividend. Taken together, the measures aim to reduce debt from US$30 billion nearer to US$20 billion.

Glencore became a major agriculture player when it bought Canadian grain handler Viterra Inc for C$6.1 billion (US$4.6 billion) in 2012.

On top of helping to reduce its debt pile, bringing in a group of investors could provide the company's agricultural unit with the funding to grow further, especially in the US, where it still has no major presence. That's something Glencore would find harder to do alone after the price of key commodities such as coal and copper plunged.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

BLOOMBERG