Glencore Sells 10% Stake in Agri Unit to Canada's Fourth Largest Pension Fund

by Sarah Day Levesque

Canada’s British Columbia Investment Management Corp. (BCIMC) will soon own a 9.99 percent stake in Glencore’s agricultural unit. Commodity trader and miner, Glencore, has agreed to sell the stake for $624.9 million cash just two months after selling a 40 percent stake in Glencore Agri to Canada Pension Plan Investment Board for $2.5 billion. The deal leaves Glencore with a 50.01 percent stake in the business.

BCIMC, Canada’s fourth largest pension fund, has a global portfolio of $123.6 billion. The fund invests on behalf of public sector clients in British Columbia and helps finance the retirement benefits of more than 526,000 plan members as well as the insurance and benefit funds that cover over 2.2 million workers in British Columbia. This acquisition will help the BCIMC increase its exposure to the agricultural sector, a strategy that can help diversify risk in the overall portfolio.

This deal values Glencore Agri at $6.25 billion and Glencore chief executive officer, Ivan Glasenberg commented in a recent statement reported by Bloomberg, “These transactions highlight the superior value of Glencore Agri, with its advantaged asset footprint and business model, relative to its closest peers.”

This latest move continues Glencore’s efforts to cut debt by pushing to sell $5 billion worth of assets – a plan announced by Glasenberg last September. Glencore Agri sell-offs to date in 2016 total $3.2 billion, keeping it on track to cut debt from $25.9 billion at the end of 2015 to between $17 to $18 billion by the end of 2016.

Under the terms of this agreement, Reuters reports that Glencore Agri would be responsible for taking on $3.6 billion in debt currently funded by Glencore, without recourse to Glencore.

Economic slowdowns in China and Brazil have been attributed to multi-year low commodity prices. These, in turn, have contributed to Glencore’s plummeting profits, according to Morningstar, particularly after the disappointing, high-profile $6 billion acquisition of Viterra in 2012.