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Cargill exits asset management business with sale of CarVal Investors

September 13, 2019
Food & Drink

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Cargill Inc has agreed to sell fund manager CarVal Investors, representatives for both companies said on Thursday, marking the commodity trader’s exit from the asset management business.

The sale is the latest transition for Cargill, the largest privately held U.S. company, which overhauled its corporate structure in recent years following a string of disappointing results.

Cargill is selling its economic interest in CarVal, which has about $10 billion under management, to a group of 17 CarVal employees, including its managing principals, chief financial officer and general counsel. The companies declined to disclose the price.

“It’s a sale of the company as well as all the economic interests going forward,” said Jay Olson, Cargill’s treasurer who also chairs CarVal’s board.

Olson will step down as CarVal’s chairman once the deal closes in October and keep his role at Cargill, according to CarVal.

Cargill wants to sell CarVal because Cargill is not actively managing the business, Olson said. The sale is unrelated to challenges facing the U.S. agriculture sector, including the trade war with China that has slowed American farm exports for more than a year, he said.

Cargill reported a 41% drop in adjusted quarterly profit in July, citing supply disruptions stemming from the trade war and also flooding in the United States.

“Cargill would rather, in terms of the businesses we’re managing around the world, be more of a hands-on manager,” Olson said.

Cargill founded CarVal in 1987 and made it an independent subsidiary in 2006. The agribusiness will remain a significant investor in several of CarVal’s 23 funds and maintain its investments following the sale, according to CarVal.

Cargill has also agreed to lock up its investments in CarVal’s “evergreen” funds, which have long-term structures, for at least four years, CarVal said. After that time, Cargill could begin the redemption process.

Cargill has been receiving about 20% of CarVal’s revenues from investment fees. The new employee-owned partnership will receive all revenues from fees, according to CarVal.

“We 100% believe in this platform,” said Lucas Detor, a CarVal managing principal. “We’re going all in.”

Cargill tried to sell CarVal in recent years, but potential deals fell through.

In 2016, Cargill spun off a hedge fund arm known as Black River Asset Management and split it into three separate employee-owned firms.

Louis Dreyfus Company, one of the world’s top four crop traders with Cargill, Archer Daniels Midland Co and Bunge Ltd, wound down its commodity fund manager Edesia Asset Management in 2017.

By Tom Polansek

Source: Reuters

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