by Wadsam | May 8, 2012 6:37 am
Japan’s Marubeni Corp is in advanced talks to buy U.S. grain and energy trader Gavilon for about $5.2 billion including debt after beating out competition from rival domestic trading firms, a source close to the deal said on Tuesday.
The board of Japan’s fifth-largest trading firm will meet as early as this week to discuss the offer, the person said, adding that Marubeni also needs to talk to its creditors to finance the transaction.
Privately held Gavilon had debt of $1.7 billion at the end of December, the source said last week. The source declined to be identified as the talks are private.
Marubeni President Teruo Asada told reporters on Monday that his company was interested in Gavilon because of its strong presence as a grains trader in the United States.
Concerns about China grabbing more of the world’s food supply have increased the urgency among Japanese grain companies to expand in the United States and Canada to ensure security of supply. The two countries account for more than a third of the world’s wheat and corn exports.
Japan was the world’s sixth largest importer of wheat in the 2011/12 marketing year, taking 6.1 million tonnes, the most since 1996/97. It was the world’s largest importer of corn, with purchases of 16.1 million tonnes, the most since 2008/09 and more than 50 percent more than second-largest importer Mexico.
A Marubeni spokeswoman on Tuesday said that no decisions had been made and declined to comment further. The Nikkei newspaper reported earlier that the trading house will pay about $3.8 billion for Gavilon.
Several people familiar with the matter said last week that Marubeni, Mitsui & Co and Mitsubishi Corp were evaluating bids for all or part of Gavilon, even though they considered the valuation of more than $5 billion from the company’s owners expensive.
Mitsui and Mitsubishi said on Monday they were not in negotiations to buy Gavilon, which began exploring a sale in January.
Industry sources had in recent months also identified Swiss commodities trader Glencore, U.S.-based Bunge Ltd and Singapore-based Noble Group as potential bidders.
Gavilon, whose owners include George Soros and hedge fund manager Dwight Anderson, has a sizeable presence in key U.S. agricultural markets, boasting the third largest U.S. grains marketing network behind Archer Daniels Midland and Cargill.
It also has a large footprint in the U.S. fertilizer market, an energy operation that includes 7 million barrels of crude oil storage and a large oil, grain and ethanol trading unit.
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