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Marubeni is said to sound out potential buyers for Gavilon
[SINGAPORE] Marubeni Corp, one of the world's biggest general trading companies, has sounded out at least two potential buyers for its US grains unit Gavilon Group LLC, according to people familiar with the matter.
The Tokyo-based company has discussed a possible sale with at least two other trading firms, said the people, who asked not to be identified as the information is private. Talks are preliminary and no decision has been made, the people said.
In response to Bloomberg inquiries, Marubeni on Monday denied that it has sounded out or approached trading firms for a potential sale of Gavilon and said it is not considering selling the unit. Marubeni will continue to position Gavilon as one of its core businesses, it said in a separate statement to the Tokyo Stock Exchange on Tuesday denying the report. Gavilon declined to comment.
Agricultural traders around the world are struggling to make money after years of bumper harvests and low prices dampened the volatility traders need to thrive. Now, the situation has worsened as China and the US make slow progress in resolving their trade war that cut commodity flows between the two biggest markets.
Marubeni said earlier this year that a decline in trading volumes and prices fueled by the spat had hurt its agricultural business. Trading giant Bunge Ltd recently cut staff as part of a restructuring while rival Cargill Inc said it's looking to shake up its business amid a slowdown in earnings.
Marubeni bought Omaha, Nebraska-based Gavilon for US$2.7 billion in 2013 on hopes it would allow the Japanese trader to expand its sourcing of corn and soybeans to better compete with other top global grain traders in Asia.
Since then, a series of issues including a US drought, low commodity prices and most recently the US-China trade war have weighed on Gavilon as well as the Japanese company.
Last year, Gavilon suspended proprietary trading of agricultural commodities and in April the company replaced its chief executive officer for the second time in three years. Marubeni also said in July that its US-based unit Columbia Grain Trading Inc stopped all new sales of soybeans to Chinese customers.
More than two years ago, Gavilon was seen as a potential target for Glencore Plc as the latter looked to enter the US grains-trading market, but Gavilon denied it was looking for a buyer.