Marubeni Is Said to Sound Out Potential Buyers for Gavilon

(Bloomberg) -- Marubeni Corp., one of the world’s biggest general trading companies, has sounded out at least two potential buyers for its U.S. grains unit Gavilon Group LLC, according to people familiar with the matter.

The Tokyo-based company has discussed a possible sale with at least two other trading firms, said the people, who asked not to be identified as the information is private. Talks are preliminary and no decision has been made, the people said.

In response to Bloomberg inquiries, Marubeni on Monday denied that it has sounded out or approached trading firms for a potential sale of Gavilon and said it is not considering selling the unit. Gavilon declined to comment.

Reports that Marubeni intends to sell Gavilon is “categorically untrue,” Marubeni said in a separate statement to the Tokyo Stock Exchange on Tuesday. “Marubeni has no intention of selling Gavilon. Marubeni considers Gavilon to be a core business of the Marubeni Group, and is planning to further grow and expand Gavilon’s business moving forward.”

Agricultural traders around the world are struggling to make money after years of bumper harvests and low prices dampened the volatility traders need to thrive. Now, the situation has worsened as China and the U.S. make slow progress in resolving their trade war that cut commodity flows between the two biggest markets.

READ: Trading Giant Marubeni Warns of Pain Ahead Unless Trade War Ends

Marubeni shares climbed as much as 2.3% to 734.4 yen, before closing at 729.3 yen on Tuesday, outpacing gains in the broader Topix index .

Marubeni said earlier this year that a decline in trading volumes and prices fueled by the spat had hurt its agricultural business. Trading giant Bunge Ltd. recently cut staff as part of a restructuring while rival Cargill Inc. said it’s looking to shake up its business amid a slowdown in earnings.

Marubeni bought Omaha, Nebraska-based Gavilon for $2.7 billion in 2013 on hopes it would allow the Japanese trader to expand its sourcing of corn and soybeans to better compete with other top global grain traders in Asia.

Since then, a series of issues including a U.S. drought, low commodity prices and most recently the U.S.-China trade war have weighed on Gavilon as well as the Japanese company.

Last year, Gavilon suspended proprietary trading of agricultural commodities, and in April the company replaced its chief executive officer for the second time in three years. Marubeni also said in July that its U.S.-based unit Columbia Grain Trading Inc. stopped all new sales of soybeans to Chinese customers.

More than two years ago, Gavilon was seen as a potential target for Glencore Plc as the latter looked to enter the U.S. grains-trading market, but Gavilon denied it was looking for a buyer.

--With assistance from Masumi Suga.

To contact the reporters on this story: Alfred Cang in Singapore at acang@bloomberg.net;Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, James Poole

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