The deal with ADQ is expected to reduce some pressure from lenders, including Credit Suisse Group AG. Until now, Louis-Dreyfus has paid off his debts by taking large dividends from the trading house, often higher than the annual profits, which has resulted in a drop in his equity value.
The deal confirms discussions first reported by Bloomberg in September. Financial terms were not disclosed, but the companies said at least $ 800 million of the proceeds from the sale would be invested in LDC. The money will be used to repay a $ 1.05 billion LDC loan to its parent company, the trader said in response to questions. The company had a book value of $ 4.5 billion in June, after paying a dividend of $ 302 million, most of which went to Louis-Dreyfus.
For ADQ, formerly Abu Dhabi Development Holding Co., acquiring a minority stake in one of the world’s four largest grain, oilseed and sugar traders will help boost UAE food security at some point. where governments around the world are stepping up. efforts to ensure they can feed their citizens.
While the fund has large companies covering key sectors of the oil-rich emirate’s economy, including the Abu Dhabi Stock Exchange and Abu Dhabi Airports, the Dreyfus deal will be its first major investment. abroad. He has become over the past year one of the Gulf’s most active sovereign negotiators, bolstering Abu Dhabi’s food, energy and logistics security through a wave of deals.
Established in 2018, it is chaired by Abu Dhabi royal family member Sheikh Tahnoon Bin Zayed Al Nahyan and was in talks with banks earlier this year to fund its spree of acquisitions, Bloomberg reported. Its assets are now estimated at around $ 136 billion, according to the Sovereign Wealth Institute.
As part of the deal announced on Wednesday, LDC signed a long-term commercial supply pact for the sale of agricultural products in the United Arab Emirates.
This is not the first time that a public investment company has acquired a stake in one of the largest agricultural commodities trading companies in the world. Temasek Holdings Pte, a Singapore state-owned company, is the majority owner of Olam International, a cotton coffee trader. In 2012, GIC Pte, Singapore’s sovereign wealth fund, purchased a 5% stake in Bunge Ltd., becoming its largest shareholder. He then sold his stake.
For LDC, the sale comes at the end of a decade of fruitless negotiations with others. Louis-Dreyfus discussed the merger of his agricultural trading house with Glencore Plc in 2011, but talks with managing director Ivan Glasenberg, which went to Glencore performing due diligence on Louis Dreyfus, failed because both parties could not agree on the assessment.
She later attempted a merger with Bunge, but the conversations never went beyond an early approach. Louis-Dreyfus also spoke to Singaporean state investment firms, having at least approached them twice to sell a stake, but in both cases the buyer hesitated over the price.
Renewed efforts to find equity investors stalled earlier this year, but the pandemic and resulting food security challenges have helped rekindle interest in LDCs, who represent the ‘D’ in the quartet of largest agricultural traders known as “ABCD”. After several difficult years in which profits plummeted, the fortunes of Louis Dreyfus and his rivals appear to have turned in 2020 as China embarked on a frenzy of buying agricultural products, especially corn, increasing its margins.
Louis-Dreyfus, 58, inherited the family business after the death of her late husband, Robert Louis-Dreyfus, who reshuffled the business in the early 2000s. Relations with his in-laws had always been strained .
LDC did not say whether a binding agreement had been signed with ADQ, only that the sale is subject to customary closing conditions, including regulatory approvals. However, Louis-Dreyfus withdrew in the past after public announcements, including merger talks with Olam in 2010.
Rotterdam-based LDC has gone through a series of management shifts in recent years, including the same day announcement in 2018 of the departure of its CEO and CFO. The company’s three-decade veteran Ian McIntosh, who took over as CEO after the surprise resigns, retired in September and was replaced by COO Michael Gelchie.
Credit Suisse advised Louis Dreyfus on the transaction and Rothschild & Co. advised ADQ.
(Updates with information about ADQ.)
–With help from Dinesh Nair and Jack Farchy.