The Canada Pension Plan has added more agricultural assets to its $282 billion investment portfolio.
The pension plan’s investment board announced last week that it will pay US$2.5 billion for a 40 percent stake in Glencore PLC’s global agricultural assets.
The deal is expected to close in the second half of the year and is subject to customary closing conditions, including regulatory approvals, according to an April 6 new release issued by the Canada Pension Plan Investment Board (CPPIB).
Glencore’s agricultural products unit, known as Glencore Agri, owns agricultural assets in Canada and around the world. Its assets include Viterra ports and grain handling facilities in Canada and Australia.
Read Also
Rented farmland jumps 3.4 million acres in Saskatchewan and Alberta
Farmland rented or leased in the two provinces went from 25.7 million acres in 2011 to 29.1 million in 2021, says Census of Agriculture data.
Glencore acquired Viterra in 2012 for $6.1 billion.
“As an asset class, agriculture is an excellent fit for a long-term investor like CPPIB, and we are excited about the opportunity to acquire a significant stake in Glencore Agri, a leading agricultural business,” said Mark Jenkins, CPPIB’s senior managing director of private investments.
“Glencore Agri complements our existing portfolio of agriculture assets, bringing global exposure, scale and diversification…. In addition, Glencore Agri’s experienced management team has a proven track record of growth, and combined with a successful business model, we see this as a compelling opportunity that aligns with CPPIB’s long-term investment horizon.”
The deal with CPPIB is part of an ongoing effort at Glencore to reduce the company’s debt load in the face of declining commodity prices and soft global markets.
Last September, the company said it would consider selling some of its Canadian grain handling assets in hopes of reducing company debt and maintaining the company’s credit rating.
Glencore chief executive officer Ivan Glasenberg told a conference call with investors late last year that the company would consider selling agricultural assets in Canada and would also entertain offers to sell a minority stake in Glencore’s global agriculture portfolio.
Steven Kalmin, the company’s chief financial officer, said Viterra’s assets would be a key piece in efforts to find an equity partner.
“If we’re talking about (agriculture) infrastructure … it would be the former Viterra assets that would be the most sought after,” Kalmin said.
Viterra is one of the largest grain handlers in Canada. Total storage capacity at its primary elevators in Western Canada is more the 1.8 million tonnes. Viterra officials declined to be interviewed last week but issued a statement April 6, saying Viterra welcomes CPPIB as a strategic partner.
“CPPIB and Glencore both recognize the significant opportunities within global agriculture and they share our vision for future growth of the business for the benefit of our farm customers and other stakeholders,” said Viterra chief executive officer Kyle Jeworski.
“The deal is expected to close in the second half of this year, and we do not anticipate any changes to how our business operates locally. Further, the Viterra brand will remain and will continue to represent our business across North America.”
According to the terms of the deal, Glencore and CPPIB will retain their ownership stakes in Glencore Agri for a period of four years. However, Glencore reserves the right to sell an additional 20 percent of its equity.
The deal is CPPIB’s latest foray into agriculture and is seen as a move that will diversify its agricultural holdings and limit geographic risks.
In addition to Canada and Australia, Glencore controls agicultural assets in Europe and South America.
CPPIB oversees a total portfolio valued at $282 billion. Its other agricultural assets include farmland holdings in Canada, the United States, Australia and South America, which are valued at close to $800 million.
