UPDATE 1-World Bank's IFC invests $55 mln in Armajaro Trading

Fri May 4, 2012 9:11am EDT

* IFC to receive interest payments, equity stake

* Armajaro Trading welcomes wider shareholder base

By Nigel Hunt and Sarah McFarlane

LONDON, May 4 (Reuters) - The World Bank is investing $55 million in London-based soft commodities company Armajaro Trading Limited in a move linked to soaring demand for ethically sourced cocoa, both parties said on Friday.

World Bank member International Finance Corp will receive a return of 7.5 percent above LIBOR on its investment as well as warrants to buy 6 percent of the company for a nominal price, Armajaro Trading Chief Executive Richard Ryan told Reuters.

"I think it is very good for our company that the World Bank has offered to invest and commit $55 million. It is definitely a vote of confidence in our business model," Ryan said in an interview.

"They (IFC) very much see us as the leader in cocoa in sustainability and traceability and so that is something that meets their objectives, hence the natural attraction."

IFC invests in the private sector to help developing countries achieve sustainable growth.

In 2002, the institution bought a stake in another major commodities trader, Olam International, but divested its holding around five years later following concerns about the Singapore-based company's forestry strategy in Africa.

Armajaro Trading is more than 70 percent owned by Armajaro Holdings, which is controlled by co-founders Anthony Ward and Richard Gower.

In 2010, a hedge fund run by Armajaro Holdings unit Armajaro Asset Management caused a stir in the cocoa market when they made what traders said was one of the biggest bullish bets ever, taking delivery of almost all available Liffe stocks and helping drive the spot contract to a 32-year high.

Armajaro Trading has focussed on sustainably sourcing its supplies of cocoa to meet demand from leading chocolate makers.

MARS COMMITMENT

Confectionery company Mars has committed that its entire cocoa supply will be certified as sustainably produced by 2020 and others manufacturers have followed their lead.

"IFC's investment represents a unique opportunity to partner with a global business leader that is active in improving the livelihood of its emerging-market farming communities and developing traceable and sustainable supply chains," IFC Agribusiness Director Vipul Prakash said in a statement.

Ryan said his company would act as a conduit to help IFC reach more farmers.

"We reach 500,000 farmers around the world and with the IFC money we will be able to increase that quite a bit," he said.

Ryan said the company has no current need for additional capital and no plans for an initial public offering.

"There are no plans (for an IPO) but we do see it as very encouraging that the shareholder base has widened. There is a lot of benefit that comes from that in terms of openness and how you are perceived," he said.

Armajaro has operations in over 20 countries and a presence in the world's key cocoa and coffee producing countries including Brazil, Colombia, Ecuador, Ghana, Kenya, Indonesia, Nigeria, Tanzania, and Vietnam.

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