(Bloomberg) -- Billionaire Margarita Louis-Dreyfus agreed to sell a 45% indirect stake in agricultural trader Louis Dreyfus Co. to Abu Dhabi sovereign wealth fund ADQ, opening the storied family company to outside ownership for the first time in its history.
The deal will give Louis-Dreyfus, who controls more than 96% of the holding company that owns LDC, an injection of much-needed cash in return for giving up nearly half of the family business. She has been taking big dividends over the past few years to help repay about $1 billion she borrowed to buy out other family members.
The deal confirms talks between Louis Dreyfus first reported by Bloomberg in September. Financial terms were not disclosed but the companies said $800 million of the proceeds from the sale would be invested into LDC to support strategic investments.
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 will help boost food security for the United Arab Emirates. In June, the fund held talks with banks to raise loans to finance an acquisition spree that included buying a 50% stake in agricultural business Al Dahra Holding Co.
The deal comes as governments around the world accelerate efforts to make sure they can feed their citizens, particularly after disruptions caused by the coronavirus pandemic. As part of the deal, LDC has signed a long-term commercial supply pact for the sale of agri-commodities to the UAE.
It isn’t the first time that a state-owned investment firm has acquired a stake in one of the world’s largest agricultural commodities trading houses.
Temasek Holdings Pte, a state-owned firm of Singapore, is for example the majority owner of Olam International, a coffee-to-cotton trader. In 2012, GIC Pte, the sovereign wealth fund of Singapore, bought a 5% stake in Bunge Ltd., becoming its largest shareholder. It later sold its stake.
For LDC, the accord ends a long-running effort by Louis-Dreyfus to find a strategic partner for the 169-year-old family business willing to take on a minority stake. Efforts to find equity investors stalled earlier this year, but the pandemic and resulting food security concerns helped revive interest in LDC, which represents the ‘D’ in the quartet of the biggest agri-traders known as the ‘ABCDs.’
“The transaction announced today constitutes a milestone in a decade-long strategy envisioned by the supervisory board, which started with the consolidation of LDC’s parent company’s shareholding,” said Louis-Dreyfus.
LDC’s trading operations showed signs of rebounding in the first half of 2020 with net income climbing 77% to $126 million from the year before. That followed more than three years of weak results due to oversupply from bumper crops and a lack of commodity price volatility that traders crave.
Louis Dreyfus Co. paid a dividend of $302 million during the first half and the Russian-born heiress received the bulk of the proceeds. The dividend reduced the company’s equity to $4.48 billion at the end of June, down from $4.79 billion six months earlier.
Credit Suisse Group AG advised Louis Dreyfus on the transaction and Rothschild advised ADQ.
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