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* Acquisition to help bulk up COFCO's grain business
* Deal follows purchase of 51 pct in Dutch firm Nidera
* Noble shares jump 5 pct after stake sale to COFCO
By Naveen Thukral and Michael Flaherty
SINGAPORE/HONG KONG, April 2 COFCO Corp has
agreed to pay $1.5 billion for a majority stake in Noble Group
Ltd's agribusiness, its second acquisition in less
than two months, as China's largest grain trader seeks to
strengthen its market position worldwide.
The two companies plan to form a joint venture, in which
COFCO will own 51 percent, to link its grain processing and
distribution business in China with Noble Agri's grain sourcing
and trading arms, the firms said on Wednesday.
The move will help China develop a powerful agricultural
trading house along the lines of its Unipec oil trading business
- one of the world's biggest buyers of crude oil - as it seeks
to shore up supplies of animal feed grains to meet soaring
demand for high-protein food.
"We can source ample, and low-cost, grains by direct
purchases from farmers in major grain-growing countries," said
Cheng Guoqiang, a researcher with the State Council Development
and Research Center, the think-tank of China's cabinet.
COFCO's participation in the global grain trade will also
help China better track the world grain market, Cheng added.
The deal adds volume to Noble's trading business via COFCO
and allows it to reduce debt. Noble's stock - which jumped as
much as 5 percent on Wednesday - has risen nearly 25 percent
since March 4, when Reuters broke the news that COFCO was in
acquisition talks with it, adding about S$2 billion in market
China is seeing massive expansion in demand for grains such
as soybeans and corn, as the growing ranks of its middle class
demand more meat in their diet.
COFCO bought a 51-percent stake in Dutch trader Nidera late
in February to gain direct access to South American grain and
oilseed supplies in a deal that valued Nidera at $4 billion
The Noble and Nidera deals mark the biggest overseas
acquisitions in China's grain sector, with a combined $2.8
billion investment, COFCO said in a statement.
The company will own high-quality assets in the world's top
grain and vegetable oil producing regions, including Brazil,
Argentina, Indonesia and the Black Sea area, following these
deals, COFCO said.
The deals follow a wave of consolidation in the world
agribusiness sector that has shrunk the number of potential
acquisitions for it to bulk up enough to compete globally with
larger rivals ADM, Bunge Ltd, Cargill Inc
and Louis Dreyfus Corp, known as the ABCDs.
SOURCES OF SUPPLY
The Noble acquisition allows COFCO to bring food supply into
China without having to go through the ABCD pipeline, and will
allow it to control costs better.
"By pushing the international strategy, COFCO will set up a
stable grain corridor between the largest global grain-growing
origins and the biggest global emerging market, in terms of
grain consumption growth in Asia," COFCO Chairman Frank Ning
said in a statement.
Noble's grains and oilseeds operations focus on South
America, Europe and Asia. It operates three oilseed processing
factories in Asia, and supplies grains, oilseeds, vegetable oil
and by-products throughout the region from Singapore.
Noble, which is 14 percent owned by sovereign wealth fund
China Investment Corp., also trades sugar, coffee and
raw materials, such as iron ore. Its agricultural division is
the smallest, and generated revenue of $15.5 billion last fiscal
year, accounting for about 16 percent of the firm's total.
Under the terms of the deal, COFCO's $1.5 billion offer
serves as an initial cash payment upon closing, expected in the
third or fourth quarter. The final price will depend on a
multiple based on Noble Agri's year-end book value and its debt
will be rolled into the joint venture.
A consortium led by China-focused private equity firm Hopu
will join COFCO as a minority investor in the acquisition and
will hold a third of the investment vehicle making the purchase.
Hopu is a private equity fund backed by Singapore state investor
Temasek and run by the well known Chinese banker Fang Fenglei,
with whom Goldman Sachs partnered for its China joint venture.
The final price COFCO pays will be 1.15 times the audited
book value of the agribusiness division - factoring in COFCO's
51 percent ownership - for the financial year ending Dec. 31,
2014, according to the Noble statement. The audited book
value was $2.8 billion by Dec. 31, 2013, it said.
COFCO and Noble still need to obtain regulatory and
shareholder approval for the deal.
J.P. Morgan was sole financial adviser to Noble while Morgan
Stanley advised the consortium that includes COFCO and Hopu.
(Additional reporting by Elzio Barreto in Hong Kong, Rachel
Armstrong in Singapore and Niu Shuping in Beijing; Editing by
Richard Pullin and Clarence Fernandez)