Louis Dreyfus sells stake to Abu Dhabi sovereign wealth fund

Louis Dreyfus Company has agreed to sell a 45 per cent stake to Abu Dhabi state-owned holding company ADQ, opening the agricultural trader to a non-family shareholder for the first time in its 169-year history.

The deal provides a much needed injection of cash for the Geneva-headquartered group and also for Margarita Louis-Dreyfus, who has been taking big dividends over the past few years to repay around $1bn she borrowed to take control of the business

The sale price was not disclosed but LDC said a portion of the proceeds, amounting to a minimum of $800m, would be ploughed back into LDC.

“The transaction announced today constitutes a milestone in a decade-long strategy . . . which started with the consolidation of LDC’s parent company’s shareholding,” said Mrs Louis-Dreyfus in a statement on Wednesday.

LDC is one of a small group of companies, which includes ADM, Bunge and Cargill, that dominates global flows of agricultural commodities.

Mrs Louis-Dreyfus is the Russian-born widow of Robert Louis-Dreyfus, whose family founded the company in 1851.

Efforts to find a strategic investor accelerated after she spent almost $1bn in 2018 to buy out other family members in LDC’s parent company. 

The sale process got off to a difficult start as investors balked at the valuation amid a difficult backdrop for the industry.

However, agricultural commodity prices have rallied this year, especially for grains and soyabeans, as governments looked to shore up their state reserves following the pandemic.

China has also been an active buyer, especially with its pig herd recovering after African swine fever hit production. 

This helped boost profits at LDC, where net income in the first half of 2020 reached $126m, up from $71m in the same period a year earlier.

At the same time, the global coronavirus pandemic has heightened awareness among big food importers about food security.

The Gulf states, which rely heavily on overseas purchases, have been looking to make investments in food and agricultural companies.

ADQ recently bought a 50 per cent stake in one of the region’s biggest agribusinesses, Al Dahra.

“Food and agriculture is an attractive, core sector for ADQ to generate financial returns,” said Mohamed Hassan Alsuwaidi, chief executive of ADQ. “LDC will further accelerate the progress we have already made this year in significantly expanding ADQ’s food and agriculture portfolio.”

As part of the deal, LDC has signed a long-term supply agreement with ADQ for the sale of agricultural commodities to the UAE.

Jean-François Lambert of Lambert Commodities said the deal with ADQ was excellent for LDC for a number of reasons.

“A minimum of $800m will be reinjected into the business and this is badly needed to accelerate LDC’s transformation from a largely trading model into a more integrated food and agribusiness,” said Mr Lambert.

“Indirectly and crucially, the fact that the main shareholder will have paid her debts means that the dividend policy of LDC will likely normalise. And last but not least LDC will get privileged access to the UAE, a welcome gift for the company.”

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