November 12, 2020

By Lynda Kiernan, Global AgInvesting Media

Iconic grain trader Louis Dreyfus Company (LDC) has decided for the first time in the company’s 169-year history to open itself to outside ownership, agreeing to sell a 45 percent stake in the business to Abu Dhabi sovereign wealth fund ADQ. 

Despite resisting outside investors, Margarita Louis-Dreyfus, who controls 96 percent of LDC’s holding company, has been trying to raise funds after taking on $1 billion in debt to Credit Suisse Group AG, among others, to buy out other family members and consolidate ownership.

Financial details were not disclosed, however, the LDC press office told Reuters that $800 million of the proceeds will be used to pay down a $1 billion loan LDC took on to bail out Biosev, a Brazil-based sugar company that is a subsidiary of one of its holding companies, and to fund the acceleration of strategic investments. 

“Our strategy aims to leverage global consumption trends through investments in new business opportunities, as the company embraces more of the agricultural value chain to become an increasingly integrated food, feed, fibers and ingredients company,” said Michael Gelchie, LDC’s Group CEO in an LDC release.

For Louis-Dreyfus and LDC this deal will alleviate this financial pressure while also giving it an opening to supply Middle East demand, and for ADQ and Abu Dhabi, which imports approximately 90 percent of its food, the partnership will offer greater food security, as the transaction includes a long-term supply agreement with LDC for the sale of commodities to the UAE. 

“As one of the world’s leading agri-commodities and food companies, LDC represents a strategic investment opportunity for ADQ, in line with our long-term food and agriculture investment strategy,” said H.E. Mohamed Hassan Alsuwaidi, CEO, ADQ.

Formerly known as Abu Dhabi Development Holding Co., ADQ was established in 2018 and is one of the largest holding companies in the region with investments in more than 90 local and international companies.

As a strategic partner of Abu Dhabi’s government, ADQ has a commitment to drive the transformation of the UAE toward greater food security and a global competitive and knowledge-based economy. 

“Food and agriculture is an attractive, core sector for ADQ to generate financial returns and strengthen the economic cluster locally,” said Hassan Alsuwaidi. “As one of the world’s leading agri-commodities and food companies, LDC represents a strategic investment opportunity for ADQ. With a diversified agri-commodity portfolio, significant scale and broad geographic footprint, LDC will further accelerate the progress we have already made this year in significantly expanding ADQ’s food and agriculture portfolio.”

Adding, “We share LDC’s vision for the future growth of the business, and look forward to partnering with LDC’s existing shareholders and management team to capitalize on the sector’s emerging opportunities by accelerating LDC’s transformative growth strategy to move towards greater value chain integration – from producers to consumers.”

As challenging as the global pandemic has made this year, LDC posted strong results for H1 2020, revealing net income for the six months to June 30 of $126 million, up from $71 million for the same time period the year before. Looking forward, LDC stated that it remains focused on “putting strategy into action” while also ensuring global food security.

“LDC will continue to leverage its core historic capabilities to efficiently analyze and capture opportunities in a rapidly changing context, while pursuing our vision to shape resilient food supply chains, guided by our purpose to create fair and sustainable value for the benefit of current and future generations,” said Margarita Louis-Dreyfus. “As we embark on the next stage of LDC’s development, we look forward to working with ADQ toward the realization of that shared vision.”

Michael Gelchie, LDC’s Group CEO added, With a shared ambition for investment in innovations and technologies that can transform food and agricultural production, the investment potential created by the long-term partnership with ADQ brings additional strength to the pursuit of LDC’s strategic growth plans, building on the strong performance delivered in the first half of 2020.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.