Louis Dreyfus to gain first outside investor via deal with Abu Dhabi's ADQ

PARIS (Reuters) - Louis Dreyfus Company (LDC) has agreed to sell a 45% stake to Abu Dhabi’s ADQ, the companies said on Wednesday, the first outside investment in the family-owned commodity merchant’s 169-year-old history.

The deal comes after a search by chairwoman Margarita Louis-Dreyfus for an investor to relieve debt built up to buy out other shareholders, and extends state-owned holding company ADQ’s foray into food commodities that are crucial to import-reliant Gulf states.

Along with Archer Daniels Midland Co, Bunge Ltd and Cargill, Dreyfus belongs to the ABCD quartet of leading agricultural commodity traders.

The transaction price was not disclosed, but LDC’s press office said at least $800 million of the proceeds will go towards repaying a $1 billion loan LDC made to bail out Brazilian sugar firm Biosev, which is controlled by one of its holding firms.

The deal also includes a long-term supply agreement to sell agricultural commodities to the United Arab Emirates, the companies said.

Margarita Louis-Dreyfus, who took control of LDC in 2009 after the death of her husband Robert, had been seeking an investor after borrowing $1 billion from Credit Suisse to buy out minority family shareholders in early 2019 after acrimonious negotiations.

Her Akira family trust subsequently controlled more than 96% of LDC’s holding company, which in turn owns about 95% of LDC, with employees holding the remainder.

The shareholder tensions coincided with a period of lean profits in trading crops like cereals, leading LDC, like its rivals, to shift down the supply chain towards food processing.

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The ADQ deal relieves financial pressure on LDC and its chairwoman, while positioning it to capture Middle East demand, Jean-Francois Lambert, a consultant and former specialist commodity banker, said.

“LDC could become the champion of food and agri-supply in the Middle East,” he said.

Some traders were cautious about prospects for the partnership, given Louis-Dreyfus’ past wrangling with family members and as the Abu Dhabi investor was little known in commodity markets.

“The new shareholders might want some control, putting in their own people, which could create tension,” a European grain trader said.

The investor will obtain board seats and other shareholder rights in relation to the size of its stake, LDC’s press service said.

ADQ, established in 2018, has this year also agreed to acquire 50% of agribusiness group Al Dahra Holdings and established Silal, a company to boost food supply.

In its first-half results, LDC declared equity of $4.5 billion as of June 30, down from $4.8 billion on Dec. 31.

But interim profits rose, with LDC pointing, like other merchants, to improved trading margins linked to price volatility and strong Chinese demand.

The deal is subject to closing conditions, including regulatory approvals, the companies said. Rothschild & Co advised ADQ while Credit Suisse advised LDC.

Reporting by Gus Trompiz; Additional reporting by Michael Hogan, Sudip Kar-Gupta, Soumyajit Saha and Davide Barbusia; Editing by Veronica Brown, Barbara Lewis and Jan Harvey