UPDATE: Gavilon Retains Morgan Stanley To Explore Strategic Alternatives -Source

Gavilon LLC, the third-largest U.S. grain trader, has hired Morgan Stanley (MS) as an adviser as it explores strategic alternatives, according to a person familiar with the situation.

The company was formed when the trading arm of ConAgra Foods Inc. (CAG) was sold for $2.8 billion in 2008 to an investor group led by Ospraie Special Opportunities Fund, General Atlantic LLC and a fund managed by Soros Fund Management LLC. The former ConAgra Trade Group was renamed Gavilon and had revenue of $12.6 billion last year.

"Gavilon has strengthened and firmly established its position as a leading global commodity company with a robust pipeline of growth opportunities," the company said in a statement. "The company has decided to explore a broad range of strategic alternatives that may further its growth and create additional value for our stakeholders."

Morgan Stanley has been retained as an adviser and the sale of the business is possible, though the process is at an early stage, according to the person familiar with the situation. No timetable for a decision has been set.

The move was first reported by Milling & Baking News.

Gavilon, based in Omaha, Neb., has expanded aggressively since the Ospraie sale. In late 2010, it announced it was buying Kansas City-based DeBruce Grain, a move that doubled the company's storage capacity. Gavilon says it is the nation's 19th-largest privately held company.

The company also bought 16 grain elevators in Washington state in 2011 to bolster its access to the growing market for Asian exports. In December, it announced plans to partner with Asian agribusiness company Wilmar International Limited to construct an edible oil processing, loading and storage facility in Stockton, Calif.

Later Friday, Gavilon announced it had completed the purchase of AgriService, a commodity broker based in Sao Paulo, Brazil.

Gavilon's move comes amid sagging fortunes among grain handlers recently. Privately held Cargill Inc. reported earnings fell 88% in its most recent quarter, and Cargill, along with Archer Daniels Midland Co. (ADM), have announced job cuts recently.

Weak oilseed processing margins and difficulty trading grain in highly volatile markets stemming from Europe's debt crisis have weighed on the sector recently.

-By Ian Berry, Dow Jones Newswires; 312-750-4135; ian.berry@dowjones.com

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