Ospraie, General Atlantic pay $2.8bn for commodities unit

An investor group has completed the purchase of ConAgra Foods’ commodity trading group in a deal including $2.2bn in cash.

An investor group led by hedge fund firm Ospraie Management and including US private equity firm General Atlantic and a private investment fund managed by Soros Fund Management has purchased the commodity trading group of packaged food company ConAgra Foods for approximately $2.8 billion (€1.8 billion).

Upon completion of the sale, ConAgra Trade Group will be renamed The Gavilon Group. Gavilon will be led by former president of ConAgra Foods’ commercial businesses Greg Heckman.

The proceeds include about $2.2 billion in cash and $550 million of payment-in-kind (PIK) debt securities. ConAgra Foods also received a warrant exercisable for 5 percent of the issued common equity of Gavilon.

PIK debt securities, popular in LBO-related transactions, have become controversial of late. A number of companies backed by private equity firms including Apollo Management and Welsh, Carson, Anderson & Stowe have switched to payment-in-kind recently. This has largely been viewed as a sign that the companies are troubled and staving off default.

Omaha, Nebraska-based Gavilon will conduct grain and byproducts merchandising, as well as agriculture, energy and other commodity trading activities and risk management services.

New York-based Ospraie Management has more than $9 billion under management and focusses exclusively on commodities and basic industries. The firm will invest in Gavilon through the Ospraie Special Opportunities Fund which makes more illiquid, private equity type investments.

General Atlantic has approximately $17 billion in capital under management. Investments range from $50 million to $500 million in equity for growth, expansions, buy-outs, consolidations and build-ups.