March 6, 2012 / 3:45 PM / 5 years ago

Glencore, Bunge eye Gavilon sale: source

Swiss commodities trader Glencore's logo is seen in front of its headquarters in Baar, near Zurich, February 6, 2012.Romina Amato

NEW YORK (Reuters) - Global trading companies including Swiss Glencore (GLEN.L) and U.S.-based Bunge (BG.N) have expressed interest in the possible sale of U.S. energy and grains trader Gavilon Group, according to a source familiar with the matter.

Gavilon, owned by hedge fund manager Dwight Anderson and investors such as billionaire George Soros, began exploring fund-raising options in January, offering the chance to buy into a leading fertilizer distribution system, a network of grain storage bins and oil storage facilities in Oklahoma.

Bids are due soon for the potential sale, which could be worth up to $5 billion, the source said. Canadian grain handling firm Viterra VT.TO, which has expanded significantly with acquisitions in recent years, could also be interested, according to the source.

Bloomberg previously reported the news and said that other potential bidders include Wilmar International (WLIL.SI), which does not have a significant footprint in the United States, and Japanese trader Mitsui & Co (8031.T).

Bloomberg said the company has also discussed a possible initial public offering with its bankers, it said.

Private equity funds have been excluded from the bidding, while leading traders like Cargill Inc CARG.UL and Archer Daniels Midland (ADM.N) have been discouraged from bidding due to potential antitrust risks, according to the Bloomberg report.

Gavilon has hired Morgan Stanley to advise on the process.

Bunge declined to comment. Glencore and Viterra could not be immediately reached for comment.


For several of the prospective bidders, Gavilon would be an opportunity to fill a gap or bolster a beleaguered trading unit.

Glencore, one of the world's top producers and marketers of commodities including crops, metals, minerals and energy, said last month that it lost money on agricultural commodities in 2011, a blemish on the firm's earnings.

A deal for Gavilon would give it a sizeable U.S. footprint in the agricultural space, a sector currently run from the company's offices in London and Rotterdam. It would also complement Glencore's strength in the oil market.

Bunge, already one of the four so-called "ABCD" traders that dominate the world's agricultural commodity markets, could benefit from Gavilon's vast storage network as it is the world's top oilseed processor and a major miller of corn.

The company, which buys crops from farmers and offers storage and transportation services, suffered alongside many of its peers last year as volatile grain markets sapped trading profits, although it fared better than some.

Bunge last month reported a better-than-expected fourth-quarter profit, emerging as a bright spot among agricultural companies whose operations have been hurt by global market fluctuations and poor margins for soy crushing.

Viterra, Canada's biggest grain handler, has grown dramatically under chief executive Mayo Schmidt, most recently with the purchase of Australia's ABB Grain for US$1.2 billion in a 2009 cash and share deal -- making it then the fifth-largest market cap among agribusiness giants.

Viterra has made no secret that it is also eyeing the United States, where it has picked up durum and oat processing plants in the past two years. Schmidt told Reuters in October that North America is the company's priority for acquisitions.

Gavilon was created just four years ago when hedge fund manager Anderson's Ospraie fund led a $2.8 billion deal to buy the former commodity trading and merchandising operations of ConAgra Foods Inc. But its roots go back 135 years to the Peavey Company, one of the early traders of U.S. grains.

It now boasts the third-largest grains marketing network behind ADM and Cargill, with over 320 million bushels of licensed storage capacity, one of the biggest fertilizer distribution systems in the world and 7 million barrels of crude oil storage -- plus a large oil, grains and ethanol trading desk.

It has 2,000 employees and had $15.6 billion of revenue in the fiscal year ended September 2011, according to Moody's.

Reporting By Michael Erman and Jonathan Leff; Editing by Jim Marshall and Tim Dobbyn

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