Marubeni excludes Gavilon’s energy business out of $3.6-bn acquisition

Japanese trading house Marubeni Corp over the weekend said that it will reduce the size of its $3.6 billion acquisition of Gavilon Group by $1 billion by excluding the US grain and energy trader's energy business out of the deal.

In May 2012, Marubeni, Japan's fifth-largest trading house had offered to buy Omaha, Nebraska-based Gavilon for $3.6 billion in order to become one of the world's largest grain trading companies. The deal includes assumption of debt of around $1.7 billion. (See: Marubeni to acquire Gavilon Group for $3.6 bn)

The proposed acquisition will propel Marubeni, which handles about 22 million metric tons of grain annually, as the largest exporter of US grains and oilseeds to China, beating Archer-Daniels-Midland.

"Marubeni will acquire all of the assets and businesses of Gavilon except the energy business," the Tokyo-based company said in a statement.

Marubeni did not give reasons for excluding Gavilon's energy business out of the deal, but analysts say that this business is a small part of Gavilon Group.

After the deal had been approved by the US and European regulators, in April, Chinese regulators had approved the transaction with stiff conditions.

China's ministry of commerce said that the merger may eliminate or limit competition in China's soybean importing market and wanted Marubeni and Gavilon to operate as separate trading units when selling soybeans to China.

The conditions also stipulate that both companies do not exchange market information, which otherwise would be seen by the Chinese authorities as uncompetitive behaviour and force it to act accordingly.

China is the world's biggest importer of soybeans and the fast-growing buyer of corn.

China imported around 80 per cent or 58 million tons of soybeans in 2012, of which Marubeni accounted for 10.5 million tons, or about 18 per cent, making it the single largest overseas seller of soybeans to China.

Gavilon, formerly known as ConAgra Trade Group, has one of the world's largest fertilizer distribution networks, as well as the third-biggest US grain-merchandising operation.

Gavilon deals in grains, oilseeds, oils and fats, dairy products, feed ingredients; renewable fuels, petroleum products, natural gas, natural gas liquids, and fertilisers.

It has around 320 million bushels of storage in the US, and handles about 20 million metric tons of grain annually. It is the third-largest grain handler in the US after Cargill and Archer Daniels Midland Co.