Marubeni is buying Gavilon, the U.S.-based grain trader, for $3.6-billion (U.S.) in a deal that launches the Japanese trading company into the top league of soft-commodities traders.
Marubeni is also assuming debts of about $2-billion, taking the total value to $5.6-billion and making Gavilon its largest acquisition ever.
Acquiring Gavilon will add to the group's commodities assets a network of 140 grain terminals in the U.S., as well as bases in Brazil, Australia and Ukraine.
The deal, which comes as Japanese companies have been taking advantage of the yen's strength to expand overseas, is the latest sign of consolidation in the agribusiness sector.
It comes in the wake of Glencore's purchase of Viterra, the Canadian grain trader earlier this year.
The acquisition will increase the volume of grain handled annually by Marubeni – which is already Japan's largest trader of corn and other grains – from 22 million tonnes to 55 million tonnes.
That compares with volumes handled by the largest grain traders, such as Cargill, ADM and Bunge , estimated at about 70 million tonnes, Marubeni said.
"The acquisition will allow Marubeni to take a big step forward in our grain strategy," said Daisuke Okada, head of Marubeni's food division.
The deal also comes as grain traders are looking to take advantage of growing demand for commodities from China.
"The main objective is to expand exports to Asia, including Japan. We expect Chinese corn imports to grow … and we believe North America will be the supplier of Chinese grain demand, so that is what we are most attracted to in Gavilon," said Mr. Okada.
He also said that Marubeni was able to see off competition for Gavilon mainly due to the synergies between Marubeni's strength in grain trading and distribution and Gavilon's strength in grain supplies.
"The combination of their strength in procurement and our strength in distribution will create great synergies," Mr. Okada said. Marubeni did not quantify those synergies.
Japan, which imports about 26 million tonnes of grain annually, including 16 million tonnes of corn, is already the world's largest importer of grains.
The acquisition of Gavilon will enable Marubeni to realize synergies through exporting corn and other grains from Gavilon's base in the U.S. to China and Japan, Mr. Okada said.
Marubeni said it would fund the acquisition, expected to complete in September, with cash in hand and bank debt.
Since Marubeni confirmed it was in talks with Gavilon earlier this month, analysts have queried the deal's impact on its balance sheet. Marubeni's net debt to equity position is already the most stretched among Japan's big five trading houses, at more than 200 per cent.
The most Marubeni has spent on acquisitions in the past is the $1.3-billion it paid for the Esperanza copper mine in Chile and the $1.5-billion it paid for mineral rights to the Roy Hill iron-ore mine in Australia's Pilbara region.
Shares in Marubeni rose 2.6 per cent on Tuesday, before confirmation of the acquisition, more than three times as much as the benchmark.