NEW YORK (Reuters) - RCMA Group will take over the cotton trading business of medium-sized UK-based merchant Plexus Cotton, the latest move by the Singapore-based trader to expand its commodities operations beyond its roots in rubber, Plexus said in a statement.
Terms of the deal, which will be effective Jan. 11, were not disclosed.
The deal will see Plexus quit physical trading more than two decades after the company was set up by Chief Executive Officer Nick Earlam in world cotton hub Liverpool.
The company will retain its production and supply chain business in Africa as well as its Eastern Linkage operation in China, Plexus said in a statement dated Tuesday.
The deal will hand RCMA Plexus’ trading book and traders, including director Chris Harman. Earlam will remain at Plexus.
RCMA has been aggressively building its business handling sugar, rubber, coffee and energy and will combine the Plexus book with its current cotton business, Tong Teik, and rename the operation RCMA Cotton, the statement said.
Plexus will continue to trade derivatives to manage risk for the operations it is retaining, a spokeswoman said in an emailed statement.
The retreat from handling physical fibre reflects tough conditions for mid-sized players as prices languish at their lowest in six years due to a global glut and lacklustre demand, and volatility in prices remains low.
It also comes almost three years after a deal for Armajaro to buy the whole company fell through. Plexus made a loss in 2013 and 2014 as depressed prices hurt the cotton business.
Building up Plexus’ trading business will require the “drive and investment” that RCMA can provide, said Earlam.
Reporting by Chris Prentice; Editing by Chizu Nomiyama and Cynthia Osterman
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