Glencore Sells Ag Unit Stake

TORONTO - Apr 6/16 - SNS -- Glencore plc has entered a definitive agreement with Canada Pension Plan Investment Board (CPPIB) to buy a 40% equity interest in Glencore Agricultural Products (Glencore Agri), for an aggregate consideration of US$2.5 billion payable in cash upon closing.

Based on the transaction, Glencore Agri is worth US$6.25 billion. As at 31 December 2015, the business had long-term debt of US$0.6 billion and working capital (net of cash) of US$3.0 billion (including readily marketable inventories of US$2.5 billion) which it intends to finance with short term debt on closing.

The transaction is subject to customary regulatory approvals and closing conditions and is expected to close during the second half of 2016. The proceeds from the Transaction will be used by Glencore to reduce net indebtedness.

Glencore Agri owns an international network of over 200 storage facilities, 31 processing facilities and 23 ports. The company deals ingrains, oilseeds products, rice, sugar, pulses and cotton. In the year to 31 December 2015, Glencore Agri reported earnings before interest and tax of US$524 million, and at 31 December 2015 had gross assets of US$10,187 million.

Upon closing, Glencore Agri will be governed by its own board of directors. CPPIB shall have the right to appoint two directors to the Board of Glencore Agri alongside two Glencore-appointed directors and the CEO, Chris Mahoney. At shareholder meetings Glencore and CPPIB representatives shall vote in proportion to their share holdings, subject to certain reserved matters.

In addition, and consistent with the mutual commitment to a successful long-term partnership, Glencore and CPPIB have agreed to an initial four year lock-up period subject to a carve-out for Glencore to sell up to a further 20% stake. As well as customary exit provisions, including a right of first refusal, each of Glencore and CPPIB may call for an initial public offering of Glencore Agri after eight years from the date of closing.