Louis Dreyfus Holding sells its energy trading division to two investor groups, reinforcing company's focus on its core agricultural business
SINGAPORE and PARIS
October 4, 2012
– There was further upheaval in the ranks of the world's commodity traders on Thursday as merchant Louis Dreyfus sold its energy trading division, reinforcing the group's focus on its core agricultural business.
A day after private equity giant Carlyle Group LP bought a leading commodity-trading hedge fund, Louis Dreyfus Group and a hedge fund owned by JPMorgan Chase & Co have agreed to sell their jointly owned energy trading business, Louis Dreyfus Highbridge Energy (LDH Energy), to two investor groups.
The sale sheds further light on the efforts of Louis Dreyfus, a traditionally secretive family-owned group, to raise extra capital to step up expansion in its agricultural markets, a month after carrying out its first-ever bond issue.
Louis Dreyfus is the "D" of the so-called "ABCD" majors - along with Archer Daniels Midland, Bunge and Cargill - that dominate agricultural commodity flows. It claims to be the world's leading trader of cotton and rice.
It said earlier this year it planned to increase investments by 40 percent over the next five years compared with the 2006-2011 period, and has since participated in the multi-billion-dollar listing of Malaysian palm oil group Felda and bought Dutch dairy trader Ecoval.
Owner Margarita Louis-Dreyfus has dismissed the idea of listing the firm on a stock market, but market rumours persist at a time of headline listings and mergers in the commodities trading sphere.
While industry giants like recently listed Glencore and rival Vitol have maintained their pre-eminence, the ranks of a dozen or so mid-tier firms have been shaken up by a series of acquisitions, start-ups and ownership changes that are dramatically altering the competitive landscape.
It began in 2011 with the rebirth of Sempra's merchant shop in the form of Freepoint Commodities, backed by private equity. This year Japanese trading firm Marubeni Corp inked a deal to buy U.S. grains trader Gavilon.
LDH Energy will be sold for an undisclosed amount to a private investment vehicle owned by Glenn Dubin, and an independent investor group, the companies said in a statement.
"As we focus our efforts on our core business as a global leader across major commodities, we look forward to maintaining our relationship with LDH Energy as a minority investor," Serge Schoen, chief executive of the Louis Dreyfus Commodities Group, said in a statement.
Dubin is the chairman and co-founder of Highbridge Capital Management, the JPMorgan-owned hedge fund that co-owns LDH Energy.
The independent investor group includes investment vehicles of family trusts including Paul Tudor Jones', one of the biggest names in the hedge fund industry.
Separately, Morgan Stanley's commodity trading division appears to be closing in on a deal to spin itself out from the bank, which is facing tough new regulations that threaten to curtail bonuses and limit physical trade.
It may now sell a majority stake in the unit to the Qatar Investment Authority, more than the minority holding earlier discussed, the Financial Times reported.
DREYFUS SEARCH FOR FRESH FUNDING
Established in December 2006, LDH Energy markets physical commodities including coal, natural gas, crude oil and refined products.
The sale comes less than four months after the Stamford, Connecticut-headquartered company expanded its global presence into fuel oil by hiring five traders at its offices in Texas, Switzerland and Singapore.
Louis Dreyfus, a 160-year-old company with French roots that has its head office in the Netherlands and its main trading operations in Switzerland, has been expanding its core agricultural trading business and ditching other operations such as telecommunications and real estate.
Louis Dreyfus did not immediately return calls seeking more financial details on the sale of LDH Energy.
The Louis Dreyfus group reportedly generated about $2 billion from a previous sale of energy assets last year.
Sources said these asset disposals eased the pressure on the group to open up its capital, having held unsuccessful merger talks with Asian commodities group Olam International in 2010.
But the group is continuing to seek fresh capital sources.
Its successful bond issue in September was worth $350 million. However, an attempt to list Brazilian unit Biosev failed to take off amid weak market conditions.
LDH Energy made $200 million to $300 million in net profit last year, according to the Financial Times, adding that the valuation of the business is in "the hundreds of millions of dollars", citing people familiar with the deal.
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