Japanese trading house Marubeni Corp. said it will cut Gavilon's energy business out of its planned takeover of the U.S. commodity merchant, reducing the size of the transaction to US$2.6 billion plus debt.
The trading company said in a statement on Monday it had modified the terms of the acquisition that was originally valued at $5.6 billion, including $2 billion of debt (all figures US$).
"Marubeni will acquire all of the assets and businesses of Gavilon except the energy business," the statement said.
The statement did not give details of the amount of debt being assumed in the revised transaction, but said the sellers would receive $2.6 billion in cash while retaining the energy business.
The move confirms a Reuters report on Friday, and indicates Gavilon's mid-sized energy business could now be on the market. Market participants had speculated Marubeni could offload an energy business not central to its plans.
"The interest was always in the grains, not the oil," one source with direct knowledge of the Gavilon deal said last week.
Omaha-based Gavilon's shareholders include investor George Soros, Dwight Anderson's Ospraie hedge fund, and Egypt's Orascom Construction Industries.
People familiar with the matter said Gavilon may consider other bids for its energy business, which it values at around $1 billion based on its exclusion from the Marubeni deal.
Its facilities, largely centred in the Midwest and on the Gulf Coast, could be attractive to rival traders or private equity firms looking for access to the North American energy boom.
Gavilon owns 8.5 million barrels of crude oil storage capacity in the United States, including more than 4 million barrels of tank space at Cushing, Oklahoma, the delivery point for the benchmark U.S. crude oil futures contract.
It also has facilities that can hold more than 10 billion cubic feet of natural gas. Gavilon was the 31st-largest seller of natural gas in the U.S. last year, according to reported sales to the Federal Energy Regulatory Commission.
An attempt to sell Gavilon's energy business would place it in on the market at the same time as Hess Corp's, trading arm, Hetco, which the oil company is divesting following pressure from activist investors to focus on oil and gas production.
Morgan Stanley has also looked at selling all or part of its energy-focused commodity division in the past year, with Wall Street facing increasing regulatory pressure and rising capital requirements.
-- Aaron Sheldrick and David Sheppard
cover the energy sector for Reuters from Tokyo and New York respectively.