Ospraie to Buy ConAgra Trading Unit for $2.1 Billion

Ospraie to Buy ConAgra Trading Unit for $2.1 Billion

March 27 (Bloomberg) -- Ospraie Management LLC, the $9 billion hedge-fund firm founded by Dwight Anderson, agreed to buy ConAgra Foods Inc.'s commodity trading and merchandising operations for $2.1 billion.

The ConAgra Trade Group, to be renamed Gavilon LLC when the sale to Ospraie's Special Opportunities fund is completed, operates grain elevators, rail cars and barges moving commodities such as wheat and soybean oil, mostly in North America.

Crop prices have surged to records this year, increasing investor interest in the infrastructure needed to meet global food demand. Hedge funds and securities firms are also acquiring stakes in companies that produce and transport commodities to gather information they can use when trading futures contracts.

``Buying such assets gives a greater insight into the entire supply chain and helps to complement trading activities,'' said Christopher Peel, chief executive officer of London-based Blacksquare Capital LLP, which invests in hedge funds. ``You get an edge over those that don't have access to the information.''

ConAgra Trade Group has 144 facilities and employs 950 people, Omaha, Nebraska-based food producer ConAgra said today in a statement distributed by Business Wire. The group also trades oil and natural gas.

Gavilon will be involved in buying and distributing grains and fertilizers, as well as commodity trading and risk management, ConAgra said. Its offices will remain in Omaha.

Chinese Demand

Ospraie, based in New York, started its Special Opportunities fund two years ago to buy stakes in closely held commodity producers such as agriculture and mining companies.

``The longer-term plan is to extend this to other related business lines,'' John Duryea, who manages Ospraie's Special Opportunities fund, said in a telephone interview from New York. ``We don't see the volume of commodity demand from countries such as China abating for some time.''

Anderson, 41, started up Ospraie in 1999, before Lehman Brothers Holdings Inc. bought a 20 percent stake in 2005 and Credit Suisse Group invested an undisclosed amount a year later.

In July 2006, Anderson said profit from agriculture would be ``exceptional'' for two years. Since then, grain prices more than doubled to reach records highs. Wheat climbed to an all-time high of $13.495 a bushel on Feb. 27. Soybeans reached $15.8625 on March 3, while corn rose to $5.795 on March 11.

Ospraie's flagship fund, which trades commodities and shares of producers, has lost investors 7.4 percent in the first two months of the year, according to documents sent to investors.

ConAgra Profit

ConAgra, which makes Orville Redenbacher popcorn and Slim Jim snacks, said today its third-quarter net income climbed 60 percent to $309.1 million. Revenue from the commodity-trading unit increased as grain prices rose. ConAgra raised prices for ingredients used by restaurants to counter higher grain, meat and dairy costs.

The trading-unit sale will free up cash to promote the nearly 40 food brands that are held by the company, Chief Executive Officer Gary Rodkin said during a conference call with analysts.

BLOOMBERG