Louis Dreyfus lays groundwork to sell stake in metals unit
Louis Dreyfus Company, one of the world’s biggest commodity traders, has fired the starting gun on the sale of a stake in its fast-growing metals business.
Gonzalo Ramirez Martiarena, the company’s chief executive, told the FT Commodities Americas Summit in Buenos Aires that Citigroup had been appointed to lead the hunt for an outside investor for a unit that has rapidly become one of the top dealers of copper, zinc and lead.
“We’ve identified some areas where we believe that we need to work urgently to find a partner to help us grow those businesses,” said Mr Ramirez.
“One of these is metals . . . we have a good place in the market but we believe we need someone to work with us to help expand the business and invest big money to expand the division.”
Mr Ramirez said the official sale process had started last week. Privately owned LDC has also received a number of approaches for its orange juice unit from potential partners, he added.
LDC is one of a small group of companies that dominate global flows of crops and food stuffs. These include Archer Daniels Midland, Bunge, Cargill and Glencore.
In recent years, the company has also expanded in industrial commodities, with LDC Metals expanding to become the world’s third biggest trader of copper, zinc and lead concentrate, behind only Glencore and Trafigura.
But tough conditions in its main agricultural markets — caused by bumper harvests and overflowing stocks — have forced a strategic rethink at LDC, which is controlled by Russian- born billionaire Margarita Louis-Dreyfus.
As part of these plans, the 166-year-old company is looking to focus on its core operations trading grain and oilseed, while seeking for partners to help run its metals, dairy, fertiliser and orange juice units.
“We wish to continue to expand in oilseeds, grains and freight, coffee, sugar . . . the typical agricultural activities,” said Mr Ramirez.
Finding an outside investor in the metals business could help finance continued expansion of the unit, while also enabling LDC to free up capital to deploy elsewhere in the company.
Mr Ramirez said LDC Metals was already seen as an “alternative” to Glencore and Trafigura in the market.
Metals trading consumes a lot of working capital in part because of the need to providing finance packages to mining and smelting companies to secure long-term supplies.
Mr Ramirez also told the conference that LDC wanted to sell its fertiliser businesses in Australia and Africa but had decided to retain its assets in Latin America.
“It gives us a strong relationship with the farmer,” he said.
Neil Hume & Emiko Terazono