France’s Louis Dreyfus, Russian investment group Summa and four other Russian firms may vie for a large stake in Russia’s largest grain trader, government-owned United Grain Co. (UGC), two sources familiar with the matter told Reuters on Tuesday.
For Dreyfus, winning the stake in UGC would sharpen its competitive edge among the world’s top grain traders, while Summa would vault into a hugely influential position as Russia is poised to become the world’s second-largest wheat exporter this year, recovering from 2010’s drought.
UGC plans to issue additional shares as part of a plan to sell a stake of 50 per cent minus one share, allowing the government to retain majority control.
Louis Dreyfus is one of the world’s four dominant agribusiness companies along with Archer Daniels Midland , Bunge Ltd. and privately held Cargill – a quartet known as the industry’s “ABCD.”
Privately held Summa Group is involved in projects ranging from oil to telecoms and has stakes in two grain export terminals in Russia’s main deep sea port of Novorossiisk. UGC controls one of the two terminals.
Highlighting the appetite for global agricultural commodities assets, Glencore last month agreed to buy Canada’s largest grain handler, Viterra Inc. in a $6.1-billion deal that will give it a huge new presence in grains.
Several Asian trading firms, including Mitsui & Co., Marubeni Corp and Noble Group, are in the running for U.S. grain and energy trader Gavilon, which could be valued at about $5-billion (U.S.), sources familiar with the matter said last month.
Members of the Louis Dreyfus family have already shown interest in Russian assets, last week agreeing to establish an agricultural joint venture, Sistema, as the Russian oil-to-telecoms conglomerate seeks to diversify further.
Dreyfus explained its decision to form a joint venture with the rationale that “the grains sector in Russia has tremendous potential” due to its low production costs and geographical position.
Representatives of Louis Dreyfus were not available for immediate comment. Summa declined to comment.
UGC is the country’s main state grain trader and planned to export up to 2.5 million tonnes of grain in the 2011/12 crop year, but has not given a final figure.
Its 2010 revenues, according to Russian accounting standards, totalled $311-million, net debt stood at $1.59-billion. The company has not yet published its results for 2011.
Summa and UGC have announced a plan to jointly build a new grain terminal in Russia’s far east.
Investment bank Troika Dialog took bids for UGC until late March, when Russia’s Rusagro and an agriculture business owned by metals tycoon Oleg Deripaska made expressions of interest in the privatization.
A letter of interest was also received from Russian agricultural firm Bio-ton, registered in the European part of Russia, and from Neftegazindustriya, whose name translates as Oil-Gas Industry.
Representatives of both of these companies were not available to comment.
Trading giant Glencore was also interested in the UGC stake and could provide financial backing, in case Deripaska’s Kuban AgroHolding wins the tender, two sources familiar with the matter told Reuters.
But a spokesman for Deripaska’s holding company, Basic Element, denied the information about Glencore’s possible financing.
A Glencore spokesman declined to comment on market rumours, in line with company policy.
Glencore is a shareholder of Russian aluminium giant RUSAL , where Deripaska’s Basic Element has the largest stake.
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