JAKARTA, April 2 The global commodities industry
is set to see further consolidation, with the metals sector ripe
for acquisitions after a fall in prices, the chief executive of
Olam International Ltd told Reuters.
The industry has seen a string of recent acquisitions, as
investors look for bargains after slowing demand in countries
like China and India pushed down prices.
China's largest grain trader COFCO Corp agreed to pay $1.5
billion to buy a 51 percent stake in Noble Group Ltd's
agribusiness, the firms said on Wednesday. The news came just
days after Cargill and Brazil's Copersucar announced
plans last week to create the world's biggest sugar trader
through a 50-50 joint venture.
Last month, a group led by Singapore state investor Temasek
Holdings offered to pay $2.1 billion for the remaining
shares of Olam that they did not already own.
"Consolidation in the soft commodities space has been a
trend for some time and it will continue to remain a trend,"
Olam CEO Sunny Verghese said on the sidelines of a conference.
"It is an attractive sector with good returns in the long
term, and there is a race intensifying for resources," he said,
adding that metals could be next to see more consolidation.
While some of the big commodities firms are cutting capital
expenditure, several funds may feel that now is a good time to
acquire metal assets on expectation prices will pick up,
U.S. private equity firm Carlyle Group, along with
other investors, agreed last month to acquire a majority stake
in metals trader Traxys Group, even as large banks are scaling
back on physical commodities trading amid increasing government
scrutiny and dwindling margins.
However, investing in the commodities industry may require
some patience partly due to the long gestation of assets such as
palm and coffee, and sovereign wealth funds may fit the bill due
to their longer-term horizons, Verghese said.
"A lot of the sovereign wealth funds are long term in terms
of their investment and holding period. So they have become more
natural investors to this asset class, than the traditional
capital market players."
(Reporting by Michael Taylor; Writing by Eveline Danubrata in
SINGAPORE; Editing by Ed Davies)