Marubeni Selling Gavilon to Viterra

Viterra Sees Expansion Opportunity in US by Acquiring Gavilon

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Gavilon, based in Omaha, Nebraska, is being sold by its Japanese parent company to Netherlands-based Viterra, which is looking to expand its grain-trading footprint in the U.S. (DTN photo by Chris Clayton)

OMAHA (DTN) -- In a shake-up for agricultural commodity companies, Viterra Limited announced Wednesday it is acquiring most of the assets of rival Gavilon from Japan's Marubeni Corp. for $1.125 billion.

The move helps Marubeni get out of what turned out to be a bad purchase when it bought Gavilon nearly a decade ago. Viterra and its parent companies see the opportunity to increase their agricultural footprint in the United States with Gavilon's 120-plus grain elevators around the country.

Viterra, based in the Netherlands, is an agricultural commodity marketing company with operations in 37 countries, including more than 180 grain elevators in 14 countries. The company also owns more than 30 processing plants, including oil crushing, biodiesel facilities and mills. Viterra also owns 25 port terminals in nine countries.

Viterra is owned 49.99% by mining and commodity company Glencore, with another 39.99% of the company held by Canada Pension Plan Investments and 9.99% held by British Columbia Investment Management Corp.

Gavilon, based in Omaha, has a network of more than 120 grain elevators throughout the U.S., as well as operations in Mexico, South America, Europe and Asia. Gavilon also has some minority ownership in two port terminals in Oregon and Washington state. Gavilon reports the company employs about 2,000 people and is the second-largest grain handler in North America based on storage capacity.

In a news release, Viterra CEO David Mattiske said adding Gavilon's assets would support Viterra's long-term strategy to increase its presence in the U.S., citing the production and export value of U.S. agriculture. Viterra's owners Glencore and the Canadian pension fund had been looking for ways to expand in the U.S. and Australia, Reuters reported last November.

"The combination of the Gavilon and Viterra origination businesses will enable us to provide more value and flexibility to our customers," Mattiske said. "We will be able to rapidly enhance our sustainable supply chains, provide higher levels of quality control and reliability, while creating exciting opportunities for our customers and employees."

Viterra expects the transaction would go through regulatory approval and be closed in the second half of this year.

Gavilon was created in 2008 by investors who acquired the ConAgra Trading Group. The Japanese trading group Marubeni bought Gavilon in 2013 for $2.7 billion but saw years of financial losses as grain prices fell. Gavilon suffered financial losses in fiscal years 2019 and 2020, but generated $300 million in profit in FY 2021, which ended March 31, 2021.

Marubeni stated the company's reevaluation of its grain business strategy and goals led the company to revisit its Gavilon purchase. "Under the circumstances of the uptrend in the grain supply industry and Gavilon's good outcomes recently, Marubeni recognized an opportunity to transfer Gavilon's grain business on appropriate terms and decided to conduct the transfer as it assessed it would be able to maximize its own consolidated asset value."

Reuters quoted Akira Terakawa, a senior executive vice president at Marubeni, saying at a press conference that Marubeni had a goal of becoming a global grain trader like Archer Daniels Midland or Cargill when it initially bought Gavilon, but that did not work out as Marubeni saw itself instead exposed to higher market risk.

"We have struggled also as our acquisition price was too high," Terakawa said. Reuters also cited Terakawa saying Marubeni's executives in Japan had a difficult time controlling Gavilon's grain business.

Marubeni stated the company is still looking to satisfy grain demand in Asia, especially for Japan. To do that, Marubeni will be holding on to some Gavilon assets. Eight grain elevators operated by Gavilon in northern states will be transferred to Columbia Grain International, a subsidiary of Marubeni. Part of the interest of a grain export terminal business in the Pacific Northwest that also is held by Gavilon will be transferred to Columbia Grain International as well.

Gavilon's fertilizer business also will be transferred to Marubeni America Corp., another subsidiary of Marubeni.

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Chris Clayton