While no valuation was given in the announcement, the deal values Ports America at over US$4 billion, according to two sources familiar with the matter.

The transaction comes amid heightened interest in logistics, with supply-chain disruption in focus as the global economy recovers from the paralysis caused by the coronavirus pandemic.

“There are lots of tailwinds for logistics assets writ large, but our approach is for the long term and so this type of strategic ports asset will be important to the U.S. for decades to come,” Scott Lawrence, head of infrastructure at CPPIB, said in an interview.

Under the terms of the deal, which is expected to close by the end of the year, the Canadian pension manager will take full ownership of Ports America.

CPPIB had previously held a 9.4 per cent stake in Ports America. The pension fund also owns a 34 per cent stake in Associated British Ports, as well as stakes in toll roads, utilities and digital infrastructure providers in the Americas, Europe, Asia and Australia, according to its website.

Alternative asset manager Oaktree has controlled Ports America since 2014, when it acquired Highstar Capital and the infrastructure-focused investor’s funds, which included the Jersey City, N.J.-based ports operator.

“Ports America’s growth, track record of innovation and strong financial profile have positioned the company for success in today’s cargo management and terminal operations environment, and we fully expect the business will only benefit from this new ownership structure,” said Emmett McCann, managing director and co-portfolio manager of Oaktree’s Infrastructure Investing strategy.

Founded a century ago, Ports America has operations in 70 locations across 33 ports in the United States. It currently handles 13.4 million twenty-foot equivalent units (TEUs) annually, which includes 10 million tons of cargo, 2.5 million vehicles and 1.7 million cruise ship passengers.

In the bulk/breakbulk sector — which handles commodities including grains, vegetable oils, raw sugar and refrigerated products, among other non-food cargoes — Ports America operates facilities at 24 U.S. ports.

In the containerized cargo sector, which includes pulses and specialty crops among other goods, Ports America provides services at 28 terminals across 18 U.S. ports, which it said gives it about a one-third share of the container market in the country.

— Reporting for Reuters by Sohini Podder in Bangalore and David French in New York. Includes files from Glacier FarmMedia Network staff.

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The sale values the agricultural unit as a whole at close to the initially expected $10 billion, including $600 million in debt and $2.5 billion in inventories, and comes after Glencore said last month it was stepping up its debt reduction plan by unloading more assets (all figures US$).

The group said it aimed to cut net debt to between $17 billion and $18 billion by the end of 2016, $1 billion more than previously planned and down from a peak of $30 billion last year.

The purchase is by the pension fund’s investment unit, the Canada Pension Plan Investment Board (CPPIB), which seeks long-term low-risk investments.

“Glencore Agri complements our existing portfolio of agriculture assets, bringing global exposure, scale and diversification,” CPPIB’s global head of private investments, Mark Jenkins, said in a statement

Glencore’s stock had collapsed to below 70 pence (C$1.30) at the end of last year, a fraction of its peak of 556 pence following its 2011 flotation, due to investor worries over its heavy debts coupled with slumping copper and coal prices.

Investment grade

The stock has, however, doubled in value since then, after the company took steps to cut debt and protect its investment- grade credit rating, by raising money via a share issue, reducing inventories, suspending dividends and selling assets.

“Management continue to be proactive and delivering on the stated objective of reducing debt,” said Charl Malan, portfolio manager at investor and Glencore shareholder Van Eck Associates.

Malan said that he expects Glencore to continue to drive debt lower via asset sales, metal streaming deals and improved operating efficiencies.

Glencore expects the agriculture deal to complete in the second half of 2016.

Major Canadian grain handler Viterra is part of Glencore’s ag business, includes more than 200 storage facilities globally, 31 processing facilities and 23 ports, allowing Glencore to trade grains, oilseeds, rice, sugar and cotton.

It generated core earnings of $524 million in 2015 and had gross assets of more than $10 billion.

Under the agreement, Glencore has the right to sell up to a further 20 per cent stake. Glencore and CPPIB may also call for an initial public offering of Glencore Agri after eight years from the date of completion, the companies said.

Glencore Agri would be run by current chief Chris Mahoney and a board to which CPPIB and Glencore would each appoint two directors.

Shares of Glencore rose as much as 2.2 per cent on the announcement of the disposal, before retreating to trade 4.5 per cent down by 12:36 GMT. The FTSE was up 0.6 per cent.

“The more assets Glencore disposes of, the more shareholders will begin to weigh up the benefits to the balance sheet versus the negatives of lost future revenue,” said Jasper Lawler, market analyst at CMC Markets.

Barclays, Citi and Credit Suisse were Glencore’s joint financial advisers and Linklaters LLP provided legal advice. Deutsche Bank was sole financial advisor to CPPIB.

— Dmitry Zhdannikov is a Reuters editor based in London, England. Additional reporting Reuters by Sarah McFarlane and Alistair Smout in London and Noor Zainab Hussain and Vidya L. Nathan in Bangalore.

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The CPPIB would take a stake of up to 40 per cent, valuing the business at about US$6 billion, the Journal reported on Tuesday, citing a source.

Glencore and CPPIB declined to comment.

The Canadian pension fund likely won an auction Glencore has been running, and a deal could be announced as early as this week, the Journal reported.

The Swiss trading giant had said last month it would offload more assets to shore up its finances to cope with a commodities rout and to cut down its debt.

Glencore had earlier lifted its target for disposals by $1 billion, to the $4 billion to $5 billion range.

The company had said it aimed to finalize the sale of a minority stake in its agriculture business, which includes Prairie grain handling giant Viterra, in its second quarter.

In October, the company was in talks with a Saudi Arabian sovereign wealth fund and China’s state-backed grain trader COFCO, along with Canadian pension funds, to sell a stake in its agricultural assets, according to sources familiar with the matter.

— Reporting for Reuters by Vishaka George in Bangalore, Eric Onstad in London and Matt Scuffham in Toronto.

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The firms are presenting final bids for the unit this month and Glencore is open to selling stakes to more than one party, Bloomberg reported, citing people with knowledge of the matter.

Glencore aims to slash net debt to $17-$18 billion by the end of 2016, $1 billion more than previously planned, by offloading more assets amid a prolonged commodities rout.

Glencore declined to comment. Canada Pension Plan Investment Board and Saudi Agricultural and Livestock Investment Co were not immediately available for comment.

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The changes make more explicit an existing ban on pension plans and trusts from buying land and continue to limit purchases of more than 10 acres to Canadian residents and corporations that are 100 per cent Canadian-owned.

The rule also defines “having an interest in farmland” to include any type of interest or benefit, either directly or indirectly, that is normally associated with ownership of the land.

All farmland financing in the province must also be through a financial institution registered to do business in Canada, or a Canadian citizen.

Under rules that were “in place previously and will not change,” the province noted, non-Canadian citizens can still own up to 10 acres of farmland, and exemptions can still be sought for “economic development initiatives.”

Saskatchewan’s farmland has long been attractive to foreign investors, with values rising even as prices ease in other fertile areas like the U.S. state of Iowa.

Pension plans were banned from ownership before the latest rules, but the province’s Farm Land Security Board (FLSB) still allowed the Canada Pension Plan Investment Board (CPPIB) to buy 115,000 acres in 2013, on the basis that its corporate structure was unique, touching off calls to close loopholes.

The new rules will also give the FLSB “new and expanded authority to enforce the legislation,” the province reiterated Monday.

At the discretion of the FLSB, for example, any person buying farmland must complete a statutory declaration. The onus goes on a person buying land to prove compliance with the legislation.

Fines for breaching the land ownership rules will increase to $50,000, from $10,000, for individuals and to $500,000, from $100,000, for corporations. The FLSB will also be authorized to charge “administrative penalties” of up to $10,000.

Changes to Saskatchewan’s farmland law are in sync with the views of the province’s residents, whom the government consulted at meetings between May and August, Agriculture Minister Lyle Stewart said.

But CPPIB, in a letter to Stewart and Saskatchewan Premier Brad Wall earlier this year, said that a diverse set of investors provides stability and liquidity.

The province’s farmland values rose 19 per cent in 2014, the fastest rate among Canadian provinces, according to Farm Credit Canada.

They have risen every year since 2002 and keeping farms in local hands has been a passionate political issue in the province.

The Saskatchewan Party government passed the amendments to its Farm Security Act in November.

— Reporting for Reuters by Rod Nickel in Winnipeg. Includes files from AGCanada.com Network staff.

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