Glencore has sold another chunk of its Agriculture business to a Canadian investment fund, raising more cash to pay down debt.
The mining giant and commodities trader has divested 9.99pc of Glencore Agriculture to British Columbia Investment Management Corporation (BCIMC) for $624.9m, having previously sold a 40pc stake to the Canada Pension Plan Investment Board (CPPIB) for $2.5bn.
The deal means Glencore will continue to hold a 50.01pc stake in the business, which will be run by the existing management team.
“We are pleased to welcome another long-term partner into Glencore Agri who shares our vision to capture the significant opportunities we believe will emerge for Glencore Agri over coming years,” said Glencore chief executive Ivan Glasenberg.
Lincoln Webb, a senior vice president of BCIMC, said the investment was an “excellent opportunity” for it to “increase and diversify our exposure within the agricultural space, a sector we view as critical to supporting rising levels of global prosperity”.
BCIMC invests funds for 526,000 pensioners in British Columbia, in Canada, and has a global portfolio of CAD$124bn (£67bn). It has a track record of investing in tandem with CPPIB; both funds have been attracted by the long-term value of the agricultural sector, with an increasing world population meaning there are more mouths to feed.
In addition, Glencore Agri has a large presence in Canada having bought Canadian grain handler Viterra in a deal in 2013.
In common with many of its peers, Glencore has been tackling a downturn in commodity prices by selling off assets it deems to be non-core. The company has now raised $3.2bn of its $4-5bn target for 2016.
The proceeds from this latest sale will go towards paying down Glencore’s debt, which stood at $25.9bn in December. It is targeting net debt below $18bn by the end of the year. As part of this latest deal, Glencore Agri’s debt of $3.6bn will be assumed by the division, rather than the parent company.
The mounting size of Glencore’s debt pile unnerved investors last year, prompting sharp falls in its share price and forcing Mr Glasenberg to announce a sweeping debt reduction plan.
Last year Glencore Agri’s earnings before interest and tax almost halved to $524m due to weak prices in agricultural commodities. A minority stake in the unit was put up for sale last October.
Glencore’s shares fell 2pc in morning trade.
Courtesy : telegraph.co.uk