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Glencore ag to become big-time acquisitor through stake sale

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Glencore's sale of a stake in its agriculture business will herald the division's growth as a acquirer in the sector – of large targets, the commodities group said, hinting at the US as a likely location for deals.

The Glencore agriculture unit "is a business that needs to grow", Ivan Glasenberg, the group's chief executive, said, flagging the limitations of the division's global footprint which, while strong in countries such as Australia, Canada and Russia, has little presence in some other major ag trading nations.

"We are not active in various parts of the world and you need to grow in those parts of the world.

"It's no secret. We're pretty weak in the US," he told investors.

'Time to bring in a partner'

"This is a business we want to grow," Mr Glasenberg said, but added that Glencore, which has worried its investors over its debt levels did not "have the real muscle" to fund the kind of deals he had in mind – prompting the need for a partner.

"We had the financial muscle to do the Viterra" deal – the $6bn acquisition four years ago of the Canada-based grains handler.

"We could do that. But to do stuff bigger, it's clear it's time to bring in a partner," he said, likening the strategy to that Glencore had already undertaken to buy the Cerrejon coal mining assets in Colombia, which had seen Glencore team-up with the likes of Anglo American and BHP Billiton.

"We knew when we were in Colombia, we couldn't do it on our own," he said.

"But we had partners. And utilising the partners, we could buy the Cerrejon complex.

"So we've taken the same decision on the ag business."

'Industry consolidation coming up'

Expanding in agriculture would allow Glencore to exploit a deal trend that the group forecast for the sector.

"It's quite clear that there is going to be a period of some industry consolidation coming up," said Steven Kalmin, the Glencore finance director.

"You don't want to miss out on that industry consolidation," which would allow the exploitation of deal synergies, and the chance to boost returns from improving utilisation of agriculture assets.

There is "global infrastructure that's out there is not being used, in our mind, to the best of its potential," Mr Kalmin said.

Multiple partners?

Mr Glasenberg added that Glencore was considering bringing more than one investor into the agriculture division, although the group would maintain a majority stake in the business.

"We are deciding how many partners we want in the ag sale," he said.

"The idea of the ag sale, as I said before, is to utilise it as a vehicle with a strong partner or partners to grow forward and grow the ag business."

By Mike Verdin

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