UPDATE 2-Japan's Marubeni to sell Gavilon grain business to Glencore arm for $1.1 bln

(Recasts with Viterra announcement, Marubeni quotes and details)

By Yuka Obayashi

TOKYO, Jan 26 (Reuters) - Japanese trading house Marubeni Corp will sell the grains business of its U.S. unit Gavilon to commodities trader Glencore PLC's Viterra arm for $1.125 billion, plus working capital, Viterra said on Wednesday.

Marubeni said it expected to gain a total of 300 billion to 400 billion yen ($2.6 billion to $3.5 billion), including loans to grains merchant Gavilon, through the deal, due to be completed after the restructuring of U.S. operations.

Marubeni will keep Gavilon's fertilizer business and some facilities for grain export.

The deal, subject to closing conditions and regulatory approvals, is expected to close by March 31, 2023.

In November, Reuters reported that Glencore and its Canadian pension fund partners were looking at options to expand Viterra in the Americas and Australia.

Besides its main U.S assets, Gavilon also has operations in Mexico, South America, Europe and Asia.

For Marubeni, the sale will mark the end of a painful journey as it booked a series of impairment losses, totalling 120 billion yen, since buying Gavilon for $2.7 billion in 2013, due to weaker grain prices and market volatility.

"Our initial goal was to become a global grain major like Archer Daniels Midland Co and Cargill by expanding trade volume, but the strategy didn't work as bigger volume posed higher market risk," Akira Terakawa, senior executive vice president at Marubeni, told a news conference.

"We have struggled also as our acquisition price was too high," he said, adding that the Gavilon grain business was not easily controlled by the Japanese managers.

Large Western grain trading houses, including ADM, Cargill and Louis Dreyfus Co., which battled years of global oversupply and thin margins, have seen their fortunes turn during the COVID pandemic as governments and food companies rushed to stockpile.

Before the sale, Marubeni will reorganise its group operations, including a transfer of eight of the grain elevators held by Gavilon in the northern United States to Columbia Grain International (CGI), another U.S.-based Marubeni unit.

Other steps include a transfer of part of the interest of a joint venture export terminal business on the U.S. West Coast that is held by Gavilon to CGI, and a transfer of Gavilon's fertiliser business to Marubeni.

Marubeni said it had decided on the deal as it saw an opportunity with reasonable terms, reflecting Gavilon's improved outcomes amid a recovery in the grain supply industry.

Despite the sale, Marubeni is looking to further strengthen its grain business to meet demand for grain in Asia, especially Japan, while reinforcing the handling of speciality crops and developing its processing and downstream businesses, it said.

($1=113.9000 yen) (Reporting by Yuka Obayashi; Editing by Clarence Fernandez, Kenneth Maxwell and Tomasz Janowski)