Cargill Inc. is selling CarVal Investors LLC, an investment-fund manager, to that firm’s leaders in a deal that marks its exit from the asset-management business.
The agriculture processor and trader started to diminish its position in financial services in early 2016 when it spun off Black River Asset Management into three independently owned firms.
CarVal was created by Cargill in 1987 and today manages $10 billion in assets. Cargill turned it into an independent subsidiary in 2006 so that CarVal could accept and manage money from outside investors. Since then, it has grown rapidly, specializing in distressed and credit-intensive assets.
The new owners will be CarVal’s three managing principals — Lucas Detor, James Ganley and Jody Gunderson — and 14 other top executives. “We are effectively going to be the same people, doing the same things, in the same places,” Detor said. “We aren’t making any changes to our real estate footprint or operationally. So, really, managing our business just like we did before, trying to get our investors the best returns that we can.”
In recent years, Cargill, the largest privately held company in the U.S. by revenue, has divested a number of businesses in an effort to focus on its core businesses that more clearly fit together. The sale ends Cargill’s position as a manager of third-party money.
“CarVal, though a very well-managed, successful business, operated as an independently managed subsidiary of Cargill,” said Lisa Clemens, Cargill’s senior director of investor relations. “Cargill has always been in financial services and we will continue to be, like our substantial risk-management business. But CarVal is really a fund manager, which is just one step further away.”
CarVal will maintain its headquarters in Hopkins, where it employs about 100 people, as well as its London, New York and Singapore offices.
Several years ago, CarVal’s three managing principals approached Cargill’s leadership with a proposition: should the giant agribusiness ever wish to sell the subsidiary, they would be interested in arranging a management buyout, or MBO.
Cargill came back to the executives this past summer to see if they were still interested in making the acquisition. That led to discussions, which led to the deal. Terms were not disclosed. The deal is expected to close in mid-October.
“We consistently have told Cargill we felt we were the best group to own and lead this company, and they agreed,” Detor said.
While Cargill will no longer have any ownership stake in CarVal, it will keep its investments in the firm’s funds.
CarVal manages funds in corporate securities, loan portfolios, structured credit and hard assets. Recently, the firm has focused on clean energy, investing more than $1 billion in commercial and industrial solar and storage, residential solar loan portfolios and secured debt investments in clean energy.
The company is also heavily invested in aviation and aircraft. CarVal owns Aergo Capital, an aircraft company that leases and trades commercial aircraft to airlines, a capital-intensive industry.
JPMorgan acted as Cargill’s exclusive financial adviser on the transaction.