Japanese trading house Marubeni Corp. (MARUY.PK) agreed Tuesday to acquire closely-held U.S. grain handler Gavilon Group LLC for about $3.6 billion. The deal, which has the approval of Marubeni board, is expected to close by September 2012. Gavilon will be acquired through a newly established wholly-owned US subsidiary of Marubeni.
Gavilon Group is a leading commodity management firm, connecting producers and consumers of feed, food and fuel through its global supply chain network. It offers origination, storage, transportation, marketing and risk management services in agriculture, fertilizer, and energy.
"We are pleased that our strategic review process has resulted in an agreement to become a wholly owned subsidiary of Marubeni. As part of a larger trading organization, Gavilon will be well-positioned to more efficiently connect supply with growing global demand," Gavilon President and CEO Greg Heckman said in a statement.
Marubeni's rival domestic rivals trading houses Mitsubishi Corp. and Mitsui & Co were also said to have been in the fray as potential bidders for Gavilon, which was put on the block in January 2012. Others who are said to have showed interest in Gavilon were Glencore International Plc (GLEN.L, GLNCY.PK, GLCNF.PK), Bunge Ltd. (BG) and Wilmar International Ltd. (WLMIF.PK).
Marubeni, Japan's fifth-largest trading company, has been is advanced acquisition talks with Omaha, Nebraska-based privately-held Gavilon since early May.
Gavilon is primarily held by Soros Fund Management, owned by billionaire investor George Soros, and hedge fund manager Dwight Anderson's Ospraie Management LLC.
The acquisition will propel Marubeni, which handles about 22 million tons of grain annually, as the largest exporter of U.S. grains and oilseeds to China, beating Archer-Daniels-Midland Co. (ADM). China is the world's biggest importer of soybeans and a fast-growing buyer of corn.
By combining Marubeni's targeted 2012 grain handling volume of 25 million tons with Gavilon's handling volume of more than 30 million tons, Marubeni will now have a combined grain handling capacity of more than 55 million tons.
The deal will also give Marubeni access to trading and distribution in two new fields, fertilizer and energy commodities such as crude oil, natural gas and fuels. Marubeni will also be well positioned to take advantage of the growing demand in both grain and fertilizer.
According to media reports, Marubeni has already said to have lined up the financing for the deal, which will include cash expected from the sale of some existing businesses, and debt raised through capital participation by financial institutions and investment funds.
Gavilon currently ranks behind the largest grain handler Cargill, Inc. and the second-largest Archer Daniels Midland in the U.S. grain market. However, it is ahead of Bunge and Louis Dreyfus.
The deal will also boost Marubeni's control of grain supplies from North America, which is the world's leading grain export hub. Marubeni is currently focusing on expanding operations in the U.S. with its wholly owned grain-merchandising unit, Columbia Grain Inc.
Morgan Stanley acted as sole financial adviser and Jones Day acted as legal adviser to Gavilon for the deal, while Marubeni is said to being advised by Nomura.
MARUY.PK last traded on Thursday and closed at $63.96.
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