Investment in ETC Group Limited

Source: 11/20/2017, Location: Asia

Mitsui & Co., Ltd. (Mitsui) has made the decision to acquire a part of shares in ETC Group Limited ("ETG") and has subsequently entered into a number of agreements, including a share transfer agreement with a total acquisition price of approximately 30 billion yen. ETG will become an equity-method affiliated company, and Mitsui shall be involved in important managerial decision-making processes.

With its headquarters in Dubai, ETG has business bases in 330 locations across 36 countries, concentrated mainly in East Africa and countries bordering the Indian Ocean, and a wide-range of business operations which include agricultural products (from origination & processing through to storage & import/export), sales of agricultural supplies (fertilizers, agrochemicals, seeds, etc.), as well as the manufacture and sale of foodstuffs.

One of ETG's credos is "If farmers grow, we grow too" and, with the goal of enabling farms to grow and become independent, the company has expanded its food- and agriculture-related business over the past 50 years. From a logistics point of view, in addition to having origination capability, warehouse facilities and vehicle fleets, ETG has the sales channels necessary to supply daily necessities and foodstuffs to each farming village. Its strength lies in this intricate and comprehensive network, as well as in the relationship of trust it has built with as many as up to two million farms throughout its history. ETG is the leading company in East Africa in handling fertilizers as well as pulses (i.e. beans excluding soybeans and peanuts), a major source of protein in Southwest Asia (India, etc.) and a one of world-leaders of sesame trading.

With the population of Africa expected to reach 1.5 billion by 2025, together with an anticipated rise in urban living to almost 50%, continued growth is forecast in order to meet the demands of food and agricultural production, as well as other business sectors, which are required to support the quality of life.

There is major potential for growth in the African market, in particular, in terms of improving harvest yields, the sophistication and efficiency of low-yield farms, and infrastructure development through private sector-led power supply distribution, and the proliferation of renewable energy.

Mitsui has specified "Nutrition and Agriculture" as one new growth area in which it possesses considerable strength as identified in its new Medium-Term Management Plan, and has been making contributions towards increasing global food yields via its business activities in agricultural supplies (e.g. agrochemicals and fertilizers), crop trading, feed additives and livestock.

Developing marine and land-based distribution logistics facilities across the world is also essential for a stable food supply. Mitsui has built a relationship of trust with ETG through many years of crop trading, and together they have met the needs of customers. With this investment, Mitsui will be assigned a number of ETG director posts and establish a new internal organization dedicated to the promotion of ETG related businesses, as well as the further expansion of the nutrition and agriculture business in Africa and Indian Ocean Rim nations.

Mitsui will draw on the experience cultivated from its business activities in the Nutrition and Agriculture sector to provide farming advice, as well as utilize its crop trading network for the procurement of agricultural supplies, amongst others, in order to help ETG expand its existing business.

With regard to the launch of new initiatives, Mitsui aims to utilize ETG's business base and diversify ETG's business scope through joint engagement in infrastructure projects and other new business opportunities across Africa. Through such collaboration, Mitsui will endeavor to support ETG to increase its corporate value whilst strengthening Mitsui's earnings base in Africa and throughout those nations bordering the Indian Ocean.

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