Japan’s Mitsui Acquires $265M Stake in Dubai Ag Trader, SCPE Exits
November 21, 2017
Japanese trading house Mitsui is expanding its presence in Africa, investing $265 million to acquire a minority stake in Dubai-based agricultural trader, ETG Group of Dubai.
Founded in 1967, ETG is active in originating and trading sesame seeds, pulses, and other agricultural products; fertilizer, agrochemicals, and seed sales; storage, and food manufacturing and processing. The group has operations through 330 locations in 36 countries with a focus in East Africa and in countries bordering the Indian Ocean, and sales totaling $3.6 billion for the 12 months ending this past March.
Under the terms of the deal, ETG will buy back shares equal to a 30 percent stake in the group from ETG founders – the Pembani Remgro Infrastructure Fund (PRIF) and Standard Chartered Private Equity (SCPE), – which will exit the company, and sell them to Mitsui by the end of March 2018, at which point Mitsui will transform ETG into an equity-method affiliate and will dedicate directors.
This deal for ETG aligns with Mitsui’s strategic plan announced in early 2014 to increase its agricultural trading volumes by 25 percent within three years as it builds itself out to pose a serious rival to the ABCD global traders of Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus. By this year, the trading house had expectations of trading 20 million tons of grain per year, putting it within reach of the global “big four”.
Within this plan, the group was aiming to increase sales to China to 5.5 million tons, up from 4 million tons, and to double volumes traded in the Middle East and North African markets to 2.5 million tons, Hiro Hidaka, head of grain trading, told AFR in February 2014.
Mitsui has made various moves recently to expand its trading business and strengthen its agribusiness interests.
May of this year was a particularly dynamic month for the trader. On May 31 GAI News reported that Mitsui & Co. acquired Top Seeds 2010, a global vegetable seed company that focuses on research, production, and the marketing of high-quality hybrid vegetable seeds. This investment in Top Seeds marked Mitsui’s first acquisition in the vegetable seed sector, and the group is viewing the acquisition as being a platform from which to build a significant presence in the market.
On May 8 the group led a $40 million Series D for sustainable, biological fish and livestock feed developer and producer Calysta Inc. The funding from the round has been earmarked to support the scaling up and commercialization of Calysta’s FeedKind™ protein, a family of alternative feed ingredients developed and produced by the California-based company for the fish, livestock, and pet sectors.
Approximately one week later, it was announced that Misui had agreed to invest 900 yen (US$8 million) in exchange for an 80 percent stake in FDR Japan Co. – a startup that is pioneering a recirculating system that will enable land-based fish farming in Japan.
Other recent deals by the group include the acquisition of a 50 percent stake in non-GMO soybean breeder and handler, Bluegrass Farms of Ohio Inc., for $15 million in October 2015; and the co-leading of a C$58 million funding round for precision agriculture and data management company Farmers Edge in January 2016. It is through this investment in Farmers Edge that Mitsui has also gained access to Eastern Colorado Seeds, which Farmers Edge partnered with in April 2016.
Through its latest deal for ETG, Mitsui will gain ETG’s origination capabilities, its vehicle fleet, its warehousing facilities, and an intricate sales network that connects a web of small villages where the company has built up a reputation of trust. Having access to this presence will be critical for Mitsui as it seeks to capitalize upon the major potential for growth that exists in the ag sector in Africa, where the population is expected to top 1.5 billion, and urban living is expected to increase by 50 percent by 2025.
Mitsui foresees this acquisition opening new African markets for its fertilizer and seed business, with custom offerings suitable for the local soil, as the company does in Chile, reports Nikkei. Together, Mistui and ETC also plan to establish infrastructure including irrigation systems, data-driven production systems, and the generation of power.
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