ConAgra Trade Group becomes Gavilon
March 17, 2008
BY Jerry W. Kram
Web exclusive posted April 7, 2008 at 9:52 a.m. CST
ConAgra Foods Inc. has agreed to sell its commodity trading and merchandising operation conducted by ConAgra Trade Group to Ospraie Special Opportunities fund, an affiliate of Ospraie Management LLC, for $2.1 billion. The sale is subject to certain adjustments. When the sale is completed, CTG will be renamed Gavilon LLC.
In 1998, CTG was formed as a business unit within ConAgra Foods, consolidating the long-term activity of the company's grains, by-products and fertilizer merchandising and distribution businesses, as well as its agriculture and energy commodity trading activities.
CTG has played a major role in the biofuels industry, starting with ConAgra Food's century-plus experience in the grain industry as well as its more recent role providing risk management services for the ethanol and biodiesel industries. Eric Watts was recently named the director of business development, which includes leading CTG's strategic initiatives for Renewable Energy. "We have been doing grain merchandising since the early 1900s and handling distillers grain for the last 10 years," Watts said. "We have been actively managing energy risks for more than a decade, and we have been actively working with ethanol and biodiesel for the last two years."
CTG offers biodiesel and ethanol producers risk management services to help manage both feedstock costs and price risk on the final product. "We have had good success in this space," Watts said. "It is a very strategic area for us to grow into." The company is in the business of physically delivering biofuel feedstocks such as grain, vegetable oil and animal fats; merchandizing biofuel byproducts such as distillers grain; and buying and marketing ethanol, biodiesel and glycerin. It offers risk management services such as forward pricing of ethanol on both index and basis spreads. CTG can help manage feedstock inventory acquisition to lock in supplies at the best possible price.
The strength of CTG is its long history of providing logistical support for the industries it serves, Watts said. "We are very well versed in providing just-in-time inventory management - whether it is from the supply or customer side," he continued. "We help manage transportation and all the risk involved in that and optimize their supply chain. We are very logistically grounded and have access to the financial markets to further mitigate risk."
Watts said CTG's view of risk management is broader than most companies. "To us risk management is not just the financial means to price contracts and manage margins," he said. "We look at transportation risks. We look at weather risks and how that affects transportation as well as crops. There are many things built into our view of risk management."
Despite a challenging year, Watts continues to be bullish on the future of biofuels, especially over the long term. He believes technological advances will improve producers' margins, both through new technologies and improving existing processes. "Continuing to challenge the existing model will lead to long term success," he said. "Things like fractionation, corn oil extraction, cellulosic and other biomass related projects all add to the basket of technologies. Renewable fuels are here to stay and there will be opportunities available 12 months from now that haven't even been thought of today."
Watts took over his current position at CTG in early March, which he said will be a challenging position, especially in this time of great market volatility. However, he's confident in the abilities and experiences of the employees to help CTG's customers navigate through this rough period. "We've been able to produce a platform to access inputs and outputs for industry," Watts said. "My job is communicating our abilities and accessing the marketplace to maximize the available margins in the industry. My specific job in the renewable energy group is to focus on our strategic initiatives and relationships going forward."
CTG will continue to work with its customers in the renewable energy industry as it makes the transition to Gavilon. "We're very excited about this opportunity and believe it will allow us to further grow our business and better meet the ongoing and future needs of our customers," Watts said.
John Duryea, portfolio manager of the Ospraie Special Opportunities fund, said, "We are excited to acquire this dynamic business and look forward to working with Gavilon's talented team to build on the success of its agricultural, energy and fertilizer commodities distribution, merchandising and trading. As a stand-alone entity, Gavilon will continue to provide its clients with the most innovative solutions. Through enhanced resource allocation and by pursuing incremental opportunities, Ospraie intends to further grow the business."
ConAgra Foods Inc. has agreed to sell its commodity trading and merchandising operation conducted by ConAgra Trade Group to Ospraie Special Opportunities fund, an affiliate of Ospraie Management LLC, for $2.1 billion. The sale is subject to certain adjustments. When the sale is completed, CTG will be renamed Gavilon LLC.
In 1998, CTG was formed as a business unit within ConAgra Foods, consolidating the long-term activity of the company's grains, by-products and fertilizer merchandising and distribution businesses, as well as its agriculture and energy commodity trading activities.
CTG has played a major role in the biofuels industry, starting with ConAgra Food's century-plus experience in the grain industry as well as its more recent role providing risk management services for the ethanol and biodiesel industries. Eric Watts was recently named the director of business development, which includes leading CTG's strategic initiatives for Renewable Energy. "We have been doing grain merchandising since the early 1900s and handling distillers grain for the last 10 years," Watts said. "We have been actively managing energy risks for more than a decade, and we have been actively working with ethanol and biodiesel for the last two years."
CTG offers biodiesel and ethanol producers risk management services to help manage both feedstock costs and price risk on the final product. "We have had good success in this space," Watts said. "It is a very strategic area for us to grow into." The company is in the business of physically delivering biofuel feedstocks such as grain, vegetable oil and animal fats; merchandizing biofuel byproducts such as distillers grain; and buying and marketing ethanol, biodiesel and glycerin. It offers risk management services such as forward pricing of ethanol on both index and basis spreads. CTG can help manage feedstock inventory acquisition to lock in supplies at the best possible price.
The strength of CTG is its long history of providing logistical support for the industries it serves, Watts said. "We are very well versed in providing just-in-time inventory management - whether it is from the supply or customer side," he continued. "We help manage transportation and all the risk involved in that and optimize their supply chain. We are very logistically grounded and have access to the financial markets to further mitigate risk."
Watts said CTG's view of risk management is broader than most companies. "To us risk management is not just the financial means to price contracts and manage margins," he said. "We look at transportation risks. We look at weather risks and how that affects transportation as well as crops. There are many things built into our view of risk management."
Despite a challenging year, Watts continues to be bullish on the future of biofuels, especially over the long term. He believes technological advances will improve producers' margins, both through new technologies and improving existing processes. "Continuing to challenge the existing model will lead to long term success," he said. "Things like fractionation, corn oil extraction, cellulosic and other biomass related projects all add to the basket of technologies. Renewable fuels are here to stay and there will be opportunities available 12 months from now that haven't even been thought of today."
Watts took over his current position at CTG in early March, which he said will be a challenging position, especially in this time of great market volatility. However, he's confident in the abilities and experiences of the employees to help CTG's customers navigate through this rough period. "We've been able to produce a platform to access inputs and outputs for industry," Watts said. "My job is communicating our abilities and accessing the marketplace to maximize the available margins in the industry. My specific job in the renewable energy group is to focus on our strategic initiatives and relationships going forward."
CTG will continue to work with its customers in the renewable energy industry as it makes the transition to Gavilon. "We're very excited about this opportunity and believe it will allow us to further grow our business and better meet the ongoing and future needs of our customers," Watts said.
John Duryea, portfolio manager of the Ospraie Special Opportunities fund, said, "We are excited to acquire this dynamic business and look forward to working with Gavilon's talented team to build on the success of its agricultural, energy and fertilizer commodities distribution, merchandising and trading. As a stand-alone entity, Gavilon will continue to provide its clients with the most innovative solutions. Through enhanced resource allocation and by pursuing incremental opportunities, Ospraie intends to further grow the business."
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