Glencore share price falls after sale of agriculture stake disappoints

Jessica Morris
Follow Jessica
Pension Plan Investment Board has agreed to pay $2.5bn (Source: Getty)

Glencore shares fell today, after investors were left disappointed by the commodities miner and trader's sale of a minority stake its agriculture arm to Canada's largest pension fund.

Glencore today confirmed it had sold a 40 per cent stake in its agriculture division to the Canada Pension Plan Investment Board (CPPIB) for $2.5bn (£1.8bn).

The Swiss group's shares had popped at the open, but they subsequently reversed gains to trade down around four per cent to 136.15p this afternoon.

Read more: End of the world’s biggest ever credit boom means there will be more "Glencores" ahead

Analysts attributed this to the deal - which gives Glencore's agriculture business am equity value of $6.25bn - valuing it below market expectations. Nevertheless, they said it was still a "good deal."

"The market was hoping for a higher price," Marc Elliott, one of the Investec analysts whose note nearly 30 per cent off Glencore's share price in just one day last year, told City A.M.

Glencore has been steadily selling assets to whittle down its $30bn debt pile, amid concerns over its sustainability given tumbling commodity prices. The company plans to reduce net debt from $25.9bn to between $17bn and $18bn this year.

Today's deal will give Glencore the right to sell another 20 per cent stake in the business to CPPIB, while both companies may call for an initial public offering eight years after the deal has closed. It's expected to complete in the second half of this year.

Read more: Glencore facing race against time as debt concern grows

“CPPIB have a proven track record in the sector and share our vision for the future growth of the business,” Ivan Glasenberg, chief executive of Glencore, said in the statement.

Mark Jenkins, senior managing director and global head of private investments at CPPIB, added: "Glencore Agri complements our existing portfolio of agriculture assets, bringing global exposure, scale and diversification."

Glencore Agri reported earnings before interest and tax of$524m in the year to 31 December.

Barclays, Citi and Credit Suisse acted as joint financial advisers to Glencore, while Linklaters provided legal advice.

Related articles