TOKYO, JAPAN — Marubeni Corp., a Japanese trading company, announced on May 29 that it has entered into an agreement to acquire Omaha, Nebraska, U.S.-based Gavilon Holdings, LLC, a grain, fertilizer and energy commodities company, for $3.6 billion.
Marubeni will take on Gavilon's $2 billion of debt and use cash and loans to fund the deal, Chief Financial Officer Yukihiko Matsumura told reporters.
In the grains business, Marubeni noted it has been able to secure a supply source from mainly North and South America and have largely focused on building distribution and sales capabilities in Asia. The company noted that with this acquisition, it has gained over 140 grain loading sites and access to a vast grains storage and distribution network in the U.S., as well as sites in key production regions in Brazil, Australia and Ukraine.
With the acquisition of Gavilon, Marubeni expects to handle 55 million tonnes of grain globally, more than doubling the 25 million tonnes it expects to handle in 2012.
The transaction will close after the necessary approvals have been received, and other closing conditions are met, Marubeni said.
“Global grain trade volumes are expected to continue to grow given the strong demand coming from developing nations, in particular China,” Marubeni said in its release about the acquisition.
According to news reports, the deal is the biggest cross-border acquisition by a Japanese company this year.
Glencore International Plc, Bunge Ltd., Mitsui & Co. and Mitsubishi Corp. had also shown interest in Gavilon.
Marubeni’s grain business operates as part of its Food Materials Division. The division is the top trader among general trading companies with annual grain trading volume of about 20 million tonnes, Marubeni said, and the company is bolstering efforts to develop sales operations worldwide, along with measures targeting grain production markets. Additionally, the company has a framework for grain procurement composed of diverse production sites worldwide, and is developing global sales operations. Leveraging internationally competitive grains, the division not only provides Japan with a stable grain supply, but is also building a structure for flexibly supplying grain to meet growing global demand.
Privately-held Gavilon LLC, one of the largest grain, processing and merchandising companies in the U.S., was established in 2008 with the sale by ConAgra Foods Inc. of its Trading and Merchandising business to Ospraie Management LLC Special Opportunities Fund in a $2.1 billion transaction. With the sale, the business was renamed Gavilon LLC Ospraie remains the principal owner of the business.
Since it became a privately-held company, Gavilon has grown rapidly with a number of significant actions, including acquisitions and capital expenditures. Gavilon operates 300 facilities and regional offices worldwide. The company estimated its business mix, as measured as share of earnings, at 62% grain and ingredients (mostly origination, storage and distribution), 20% energy (storage, transportation and logistics) and 18% fertilizer (distribution).
According to the 2012 Grain & Milling Annual, Gavilon was the third largest grain storage company in the U.S.
“We are pleased that our strategic review process has resulted in an agreement to become a wholly owned subsidiary of Marubeni,” said Greg Heckman, president and chief executive officer of Gavilon. “As part of a larger trading organization, Gavilon will be well-positioned to more efficiently connect supply with growing global demand.
“Marubeni and Gavilon share a similar focus on customers, employees, growth and risk management, and we anticipate minimal changes to our organization and operations. We are excited by the opportunities this transaction will create and look forward to what we will achieve together.”