Gavilon deal part of global trend | Marubeni Corp. is watching a growing demand for food in developing nations
A Japanese trading firm is the latest company attempting to secure a major stake in the rapidly consolidating global grain industry.
Executives from Marubeni Corp., announced that the company has agreed to buy Gavilon Group, the third largest grain handling company in the United States, for $3.6 billion US.
The proposed deal would also see Marubeni assume existing Gavilon debts estimated at $2 billion, bringing the total value of the transaction to $5.6 billion.
The Marubeni announcement, confirmed by Gavilon Group president Greg Heckman, was made May 29, the same day that shareholders of Canada’s largest grain company, Viterra, approved a $6.1 billion dollar takeover by Switzerland-based Glencore.
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“Global grain volumes are expected to continue to grow given the strong demand coming from developing nations, in particular China,” Marubeni officials said in a May 29 news release.
“With this acquisition, Marubeni will have gained over 140 grain loading sites and access to a vast grains storage and distribution network in the U.S.”
“The main objective is to expand exports to Asia, including Japan,” added Daisuke Okada, head of Marubeni’s food division, in an interview with the Financial Times.
“We expect Chinese corn imports to grow … and we believe North America will be the supplier of Chinese grain demand, so that is why we are most attracted to Gavilon.”
Gavilon, based in Omaha, Nebraska, is involved in the grain, fertilizer and energy industries and has roughly 300 locations around the world.
Gavilon’s website says the company employs 2,000 people and operates 74 fertilizer handling facilities and 145 grain handling facilities.
The company’s grain operations, which include primary elevators in the United States and terminals and collection facilities in North America, Brazil, Australia and Ukraine, comprise more than 320 million bushels of capacity.
In 2011, Gavilon handled 34 million tonnes of grain and distributed more than six million tonnes of fertilizer, the website said.
Marubeni’s grain handling volumes, which are estimated at 25 million tonnes in 2012, will expand to 55 million tonnes per year by early 2013, company officials said.
That would give Marubeni total grain volumes that compare favourably with some the world’s largest grain traders, including Cargill, Bunge and ADM.
Gavilon’s roots date back to 1874 when Peavey Company opened its first North American grain handling facility.
Peavey was acquired by ConAgra Foods in 1982.
In 2008, a group of investors formed Gavilon and acquired the assets of the ConAgra Trade Group.
Two years later, Gavilon acquired assets owned by the DeBruce Companies, a move that significantly expanded Gavilon’s agricultural operations in the U.S.
The Gavilon Group has been the subject of many takeover rumours over the past few months.
The Marubeni announcement also fuelled speculation of further takeovers and acquisitions in the global grain industry.
Rumours persist that international grain company Louis Dreyfus is positioning itself to acquire additional assets.
In Australia, the country’s second largest grain handling company, GrainCorp, has been the subject of ongoing takeover rumours.
