Abu Dhabi:Louis Dreyfus Co., the storied agricultural trader controlled by billionaire Margarita Louis-Dreyfus, is in talks to sell a stake in the firm to Abu Dhabi sovereign wealth fund ADQ, potentially opening the family company to outside ownership for the first time in its 169-year history.
A successful deal would give the trading house an injection of much-needed cash as its controlling shareholder seeks funds to pay down loans. For ADQ, formerly known as Abu Dhabi Development Holding Co., acquiring a minority stake in one of the four largest traders of grains, oilseeds and sugar could boost food security for the UAE, amid concerns brought on by disruptions caused by the coronavirus pandemic.
Profit dip
Margarita Louis-Dreyfus has been seeking cash ever since she took out about $1 billion of loans to buy out other family members and take control of the firm. Meanwhile, the trading house has been forced to cut costs and jobs as profits declined due to an abundance of crops and a lack of price volatility that traders crave.
In 2019, LDC was looking for equity investors to expand its geographical footprint. That initiative stalled earlier this year as sovereign wealth funds, other trading houses and private equity investors baulked at valuations, and the logic of taking a minority stake.
The pandemic and resulting food security concerns have helped revive interest in LDC, which represents the 'D' in the quartet of the biggest agri-traders known as the 'ABCDs'. Archer-Daniels-Midland Co., Bunge Ltd. and Cargill Inc. are the other members of the grain trading giants known as the ABCDs.
In June, ADQ held talks with banks to raise loans to finance an acquisition spree that included buying a 50 per cent stake in agricultural business Al Dahra Holding Co.
Agenda setting
A successful deal would underscore government desire to strengthen food security via agri-trading businesses. Cofco Corp., China's biggest food company, spent billions on acquisitions to create a global trading arm called Cofco International Ltd. In addition to state-controlled Cofco, CIL investors include Singapore's Temasek and China Investment Corp.
Archer-Daniels-Midland Co., Bunge Ltd. and Cargill Inc. are the other members of the grain trading giants known as the 'ABCDs.'
