U.S. agricultural commodities trader Archer Daniels Midland Co has agreed to sell its Crop Risk Services (CRS) insurance business for $127.5 million to Validus Holdings Ltd, the companies announced on Monday.
The deal, which is expected to close in the first half of this year pending a regulatory review, includes a services agreement under which ADM will continue to offer insurance products and grain marketing services to CRS customers, the company said.
ADM said it expects to record a book gain upon closing.
The sale comes amid a commodities market downturn that has squeezed margins for ADM and other agribusinesses and prompted divestments of lower-margin and noncore businesses.
Rival Cargill Inc sold its crop insurance unit in December 2015. ADM is in the process of selling its ethanol-producing corn dry mills amid persistently weak margins.
“We regularly evaluate our portfolio to ensure that our businesses and assets best fit our strategy to maximize long-term returns,” said Joe Taets, president of ADM’s Agricultural Services unit.
“As a result of that ongoing process, we have identified a better strategic fit for the Crop Risk Services business,” he said.
ADM shares closed down 0.9 percent at $44.13 on Monday, a week ahead of the release of fourth-quarter results. Validus shares were down 0.7 percent at $56.51.
(Editing by Matthew Lewis)
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