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B.C. pension funds to get piece of Glencore ag unit

Glencore selling just under half its ag unit to help cut debt

Viterra
(Dave Bedard photo)

The investment firm for British Columbia’s public-sector pension funds is set to buy just under 10 per cent of the agricultural arm of commodities firm Glencore.

Swiss-based Glencore announced Thursday it has a “definitive” deal to sell 9.99 per cent of its “Glencore Agri” business for US$624.9 million cash to the B.C. Investment Management Corp. (bcIMC).

The bcIMC stake, combined with the 40 per cent locked up in April for sale to the Canada Pension Plan Investment Board for $2.5 billion, leaves Glencore with a slim majority stake of 50.1 per cent in Glencore Agri (all figures US$).

Glencore Agri’s holdings include processing, handling and marketing operations worldwide — among them Regina-based Viterra, Western Canada’s top grain handler, which Glencore bought in 2012.

Glencore CEO Ivan Glasenberg said Thursday bcIMC “shares our vision to capture the significant opportunities we believe will emerge for Glencore Agri over coming years.”

The CPPIB and bcIMC deals, he said in a release, “highlight the superior value of Glencore Agri, with its advantaged asset footprint and business model, relative to its closest peers.”

The terms of the deal also give bcIMC one director’s seat on the board of Glencore Agri, which will “continue to be run by the existing management team,” Glencore said.

Lincoln Webb, bcIMC’s senior vice-president for infrastructure and renewable resources, said the deal “provides an excellent opportunity for bcIMC to increase and diversify our exposure within the agricultural space, a sector we view as critical to supporting rising levels of global prosperity.”

The Reuters news service last month reported a deal for the 9.9 per cent stake in Glencore Agri was in the works, citing unnamed sources.

Those sources said bidders in the running had included Qatar’s sovereign wealth fund, Saudi Arabia’s ag investment firm SALIC and an unnamed Canadian pension fund.

“Net indebtedness”

Both the bcIMC and CPPIB deals, pending the usual regulatory approvals, are expected to close during the second half of 2016, Glencore said.

Once those deals close, Glencore said, the company expects Glencore Agri to assume all its own debt, which today is worth about $3.6 billion and funded by Glencore.

That funding, now around $600 billion in long-term debt and $3 billion in short-term debt for financing of working capital, is to “ultimately be funded by Glencore Agri without recourse to Glencore.”

Glencore will then be left with $3.124 billion in cash proceeds, which the company said will go to “reduce net indebtedness.”

Facing a commodities slump and shareholder pressure to pay down debt, Glencore announced plans last fall to sell a minority stake in Glencore Agri, among other assets, with the aim of nearly halving its net debt from 2015 levels of up to $30 billion, by the end of this year.

A $100 million cash deal announced in April, to sell its Komarovskoe gold deposit in Kazakhstan to Polymetal International, puts Glencore’s total asset sales so far this year at $3.2 billion toward a 2016 target of $4 billion to $5 billion, the company said.

Clients of bcIMC, billed as one of Canada’s biggest institutional investors within capital markets, include funds financing retirement benefits for over 526,000 plan members.

The Victoria-based corporation also manages insurance and benefit funds for over 2.2 million workers in the province, as well as the WorkSafe BC Accident Fund and certain public trusts. — AGCanada.com Network

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