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Japan firm, largest grain trader

05/29/2012 @ 10:52am

Marubeni Corp. (8002.TO) said Tuesday it will buy Gavilon Group LLC, the U.S.'s third-biggest grain handler, for $3.6 billion excluding debt, in a deal that will make it one of the world's largest grain traders.

The acquisition, Marubeni's most expensive purchase to be carried out on its own, will put its grain trading business on par with global heavyweights such as Cargill Inc. Tokyo-based Marubeni will aim to trade 25 million metric tons of grain in the current fiscal year ending March 2013. Marubeni said the Omaha, Neb.-based Gavilon's 30 million tons could take global grain handling volume to over 55 million tons.

The deal represents the biggest cross-border acquisition by a Japanese company so far this year and the most expensive purchase solely carried out by Japan's fifth-largest trading house by revenue, according to data provider Dealogic. The U.S. grain trader also carries about $2 billion in debt. Marubeni said on Tuesday it will be partly financed by bank borrowing and that it expects the acquisition will add $100 million to its bottom line next fiscal year.

The move accelerates the Tokyo-based company's efforts to position itself as a regional powerhouse to feed the growing and hungry Asian market, namely China by boosting its access to actual grain supplies.

"What Marubeni lacked was producing capabilities and what Gavilon lacks was business overseas. In this way, we were a good match," said Daisuke Okada, an adviser on food products to Marubeni President Teruo Asada, at a press conference on Tuesday. Okada said the U.S. grain company will be positioned to supply China's demands as it faces shortages in the future.

Closely-held Gavilon was formed when the trading arm of ConAgra Foods Inc. was sold for $2.8 billion in 2008 to an investor group led by Ospraie Special Opportunities Fund, General Atlantic LLC, and a fund managed by Soros Fund Management LLC. The company had group revenue totaling $17.85 billion last year.

"As part of a larger trading organization, Gavilon will be well-positioned to more efficiently connect supply with growing global demand," Gavilon chief executive officer Greg Heckman said in a statement. Marubeni said the transaction is expected to be completed by September. Morgan Stanley advised Gavilon and Nomura advised Marubeni on the deal.

Japanese trading houses have been aggressively buying assets overseas as they seek to secure natural resources and commodities. Marubeni alone has spent around $11 billion in overseas acquisitions since the beginning of last year. Marubeni has said it will seek to balance out its portfolio and focus on driving more revenue from its non-energy businesses. About 7.5% of its profit in the last fiscal year came from its food-related businesses and the company previously said it aims to lift that to over 10%.

-By Yoree Koh and Kana Inagaki; +81-3-6269-2840; yoree.koh@wsj.com

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