The sale is part of a debt-cutting program Glencore Chief Executive Officer Ivan Glasenberg unveiled previous year in a move to mitigate concern about the company’s capacity to pay down $30 billion of debt as commodity prices tumbled.
Advertisement
Glencore announced in a statement this morning that it had entered into an agreement with Canada Pension Plan Investment Board (CPPIB) to sell a 40-percent stake in its agricultural business, Glencore Agri, for $2.5 billion in cash.
The stock has, however, doubled in value since then, after the company took steps to cut debt and protect its investment- grade credit rating, by raising money via a share issue, reducing inventories, suspending dividends and selling assets.
Glencore shares rose in early trade but then fell 0.67pc.
Glencore and CPPIB have agreed to an initial four year lock-up period subject to a carve-out for Glencore to sell up to a further 20 percent stake.
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.
Glencore Agri plays an important role in seaborne trade within the global agriculture value chain and is well-positioned to benefit from positive macro fundamentals, particularly population growth and the resulting increase in demand for food.
Mark Jenkins, senior managing director and global head of private investments at CPPIB, added: “Glencore Agri complements our existing portfolio of agriculture assets, bringing global exposure, scale and diversification”.
Glencore Agri is a global enterprise primarily focused on grains, oilseeds products, rice, sugar, pulses and cotton. A year ago its earnings before interest and tax nearly halved to $524m due to weaker prices in agricultural commodities.
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.
Advertisement
Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 19 million contributors and beneficiaries. The miner noted that the business’ long-term debt stood at $600 million as at December 31, 2015.
