Mitsubishi to double Australia grains with Olam unit purchase

Mitsubishi Corp. will almost double its Australian grain handling volumes after the Japanese firm agreed to buy a controlling stake of Olam International Ltd.’s unit in the world’s fourth-largest wheat exporting nation.

The US$64 million ($80 million) acquisition of 80% of Olam Grains Australia gives Japan’s biggest trading house control over a business that handles more than 1 million metric tons of grain a year, a Mitsubishi spokesman said by phone today from Tokyo, asking not to be named in line with company policy. Olam will retain 20% of the unit, which includes a 32.5% stake in Newcastle Agri Terminal in Eastern Australia.

With access to the port facility Mitsubishi, which already trades about 1 million tons of grain in Australia a year, can consider adding grain collection sites further inland, the spokesman said. Most of Mitsubishi’s Australian grain trade, based in Brisbane, Queensland state, is in wheat, he said.

A slowdown in Chinese demand growth for coal and iron ore is prompting Japanese trading houses to shift focus to food and services. Mitsubishi’s domestic rival Sumitomo Corp. last month vowed to emerge as one of Australia’s top three grain exporters by adding silos and investing in new ports.

With more attention on food, Mitsubishi plans to double its global grain handling volumes to 20 million tons from about 10 million tons by 2020, the company spokesman said. This is part of the firm’s strategy to double profits from businesses outside of metals and energy by the end of this decade, he said.

Mitsubishi’s purchase of the unit stake is expected to be finalized next year, Singapore-based Olam said in a statement yesterday.