GLENCORE is understood to be in talks with a number of prospective investors to sell a large slice of its agricultural commodities business that could raise as much as $US2 billion ($2.8 billion).
Several parties, ranging from China's state-backed grain trader COFCO, to Saudi and Singapore's sovereign wealth funds such as Saudi Agricultural and Livestock Investment Co and GIC, respectively, along with Canadian pension funds like CPPIB, have been mentioned as possible bidders or investors.
Much of Glencore's agricultural business came from the $C6.1 billion purchase of Viterra, a Canadian grains trader and handler, in 2012. That purchase brought with it a series of assets in Australia, including grain-handling and port assets.
Investment banks Citigroup and Credit Suisse are handling the negotiations for Glencore, according to the reports.
The prospective sale of equity in its agricultural unit comes as Glencore is seeking to raise $US2.5 billion from shareholders in a bid to slash borrowings.
It has also signalled a series of cuts to metals and coal production along with the sale of metals division assets.
Citigroup has speculated that Glencore could be taken private by management if it cannot garner stronger investor support for its shares.
UBS has valued Glencore's entire agriculture business at between $US10 billion and $US12 billion.
"Glencore is now under pressure to strengthen its balance sheet via asset sales or a capital injection, and time is of the essence. There is value in Glencore shares if the company can pull the appropriate levers now, but risks are clearly very high," broker Jeffries told clients.
Glencore, which floated at 530p per share in 2011, is now trading near record lows after a series of damning analysts' notes highlighted the poor state of the company's finances and its exposure to further declines in global commodities markets.
Early last week its shares slumped to 71p ($1.53), while the cost of insuring its debt has blown out to near default levels.
Last month, Mr Glasenberg outlined an ambitious bold plan to raise $US10.2 billion in a bid to cut debt by a third, including suspending its dividend and offloading some assets.
In addition, the company raised $US2.5 billion from a capital-raising drive and cut 400,000 tonnes of copper production from some of its African mines.
It is also in talks to sell its metals byproducts business in South America.
–WIRES
