Marubeni to exclude energy unit from its acquisition of US Gavilon

10 June 2013 18:57  [Source: ICIS news]

HOUSTON (ICIS)--Japanese trading firm Marubeni confirmed on Monday that it is modifying the acquisition of Omaha-based commodities trader Gavilon by excluding the energy segment of the business and thereby reducing the cost by $1bn (€760m).

In 2012 Marubeni agreed to purchase Gavilon for $3.6bn plus assume approximately $2bn in company debt.

Marubeni did not offer an explanation for excluding the energy business but a sentiment among analysts is that the trading firm viewed the energy sector as the least attractive offering, as it was only contributing an estimated 15-20% of Gavilon’s total earnings and immediately reduces the amount of debt being transferred.

“Marubeni will still acquire 100% of the equity interests of Gavilon and the sellers will receive approximately $2.6m in cash and retain Gavilon’s energy business. As a result Marubeni will acquire all of the assets and businesses of Gavilon except the energy business,” said Marubeni.

According to Marubeni, the energy business handles crude oil, natural gas and fuels and has storage facilities dedicated to each product. It also includes Gavilon’s fertilizer trading and storage operations.

Initially the deal was suppose to have concluded in September 2012 but was delayed as regulators reviewed the proposed acquisition. It was finally approved last month, but the concession came with some rigid conditions set forth by Chinese governmental regulators, who were concerned about limiting competition in the country’s soybean market.

China is the largest importer of soybeans, with 58m tons entering the country in 2012. Of that number Marubeni is estimated to have accounted for about 18% of the shipments.

As part of their approval, the regulators set forth that Gavilon and Marubeni must maintain separate and independent trading operations in terms of selling to China and are limited to how much market information can be exchanged between the distinct business units.

“Marubeni has received necessary approvals from all relevant competition authorities. The Chinese competition authority granted conditional approval and Marubeni is currently in the process of fulfilling those conditions,” Marubeni said.

Adding Gavilon will set the stage for Marubeni to become an even larger player in the global commodity business as it will now have access to the US company’s vast grain storage and loading facilities, as well as increased access to production regions in North and South America. 

At this time Marubeni is considered Japan’s fifth-largest trading firm and is currently ranked as the second-largest exporter of domestic grain to China.

($1 = €0.76)

By: Mark Milam
+1 713 525 2653

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