Sector News

Cargill mulls sale of metals and energy businesses

July 25, 2016
Consumer Packaged Goods

Cargill Inc., the U.S. commodities giant, is considering a sale of its metals and energy businesses as it revamps its portfolio around core food and agricultural activities, according to people familiar with the matter.

Cargill, the largest private company in the U.S. by sales, has been pruning its vast business empire to help focus on more profitable products and keep pace with consumers’ changing tastes.

The energy and metals businesses trade in markets including North American power and gas, oil and oil products, steel and iron ore. Cargill trades about 40 million metric tons of iron ore and five million metric tons of steel annually, along with 200 million metric tons of iron and steel derivatives, according to data on its website.

“Cargill is very active in the energy and metals markets to serve its customers,” a spokeswoman said.

The company is exploring sales of the units as part of a strategic review of those businesses, which still is in its early stages, one person familiar with the matter said. Cargill may not end up selling the businesses, the person said.

This month Cargill struck a deal to sell its U.S. agricultural retail operations, which sell about $150 million in supplies and services to farmers annually, to Canada-based agribusiness firm Agrium Inc. Cargill also agreed to sell two Texas-based cattle-feed yards to Friona Industries LP, a rival feedlot operator.

Those were the latest in a flurry of deals steered by Chairman and Chief Executive David MacLennan and designed to reposition the 151-year-old agricultural conglomerate for future growth under private ownership of the Cargill and MacMillan families.

Since mid-2015, Cargill has also sold its U.S. crop-insurance agency, a sauces business, its interest in a steel-processing venture and its U.S. pork business.

As it sells assets, the company, which began as a grain trader, is reversing some of the diversification it pursued in the 1980s when it branched out into an array of products from steel to rubber.

Cargill has reinvested some of the proceeds into acquisitions, including deals for a salmon-feed company, the industrial chocolate operations of Archer Daniels Midland Co., several U.S. meat-processing plants and a software company focused on animal-feed formulation.

The company also has invested to expand existing poultry, animal-feed and egg businesses, while touting healthier ingredients for bread dough and its efforts to reduce the use of antibiotics in its chickens and beef cattle.

By Sarah McFarlane and Jacob Bunge

Source: Wall Street Journal

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