China’s Cofco to buy 51% in Noble Group's agribusiness for $1.5 bn

Cofco Corp, China's largest grain trader, today struck a deal to buy a 51-per cent stake in Noble Group Ltd's agribusiness for $1.5 billion, its second deal in less than a month as part of its plan to secure the country's food supply.

The Noble deal comes less than a month after the Chinese state-owned food giant offered to buy a majority 51-per cent stake in Nidera, in a deal that valued the Dutch grain trader at $4 billion including debt. (See: China's Cofco buys majority stake in Dutch grain trader Nidera to secure country's food supply)

Cofco and Noble will form an agribusiness joint venture called Noble Agri Limited, which will become the principal international origination platform for Cofco, with its upstream origination and trading operations linked to the downstream processing and distribution capabilities of Cofco and its affiliates in China to create a fully integrated value chain, consistent with COFCO's strategy.

Under the terms of the agreement, Cofco will acquire a 51-per cent stake in Noble Agri from Noble in an all cash transaction to establish a 51 per cent/49 per cent joint venture.  

The transaction values Noble Agri equity at 1.15x 2014 book value. As at 31 December 2013, Noble Agri had shareholders' equity of $2.8 billion and net debt of $2.5 billion.

A consortium of international investors led by China-focused private equity firm Hopu Investments will join Cofco as minority co-investors in this acquisition.  Cofco will hold two-thirds of the investment vehicle with the balance held by the Hopu-led consortium.

Frank Ning, chairman of Cofco will assume the role of chairman of Noble Agri and Richard Elman, founder and chairman of Noble will be deputy chairman, while Yusuf Alireza, CEO of Noble, will be the interim CEO of Noble Agri.

Established in 1998, Noble Agri is the agriculture platform of Noble Group and mainly deals in agricultural trading and processing of grains and oilseeds, sugar, cocoa, cotton and coffee.

It buys from low-cost producing regions such as South America, South Africa, East Europe, India, and Australia, and sells to regions with high demand, such as Asia and Middle East.

It owns and operates logistics and processing assets in strategic locations within key global grain trade flows such as Timbues in Argentina.

The business is the company's smallest by revenue, accounting for about 16 per cent or $15.5 billion of sales in 2013, according to data compiled by Bloomberg.

Noble, in which, China's sovereign wealth fund CIC holds a 15-per cent stake, manages a global supply chain of agricultural, industrial and energy products.

It has a diversified portfolio of essential raw materials, integrating the sourcing, marketing, processing, financing and transportation through 100 offices in more than 40 countries.

Noble has interests in coal and iron ore mines, grain crushing facilities, sugar and ethanol plants, fuel terminals and storage facilities, vessels, ports and other infrastructure.

It sources raw materials from low-cost producers such as Brazil, Australia and Indonesia and supplies to high-growth markets including China, India and the Middle East.

Cofco is China's largest food processing, manufacturer and trader and also has an extensive business portfolio covering branded consumer foods, packaging materials and products, hotels & real estate, finance and others.

A Fortune 500 company, Cofco is the largest shareholder in China's largest dairy company China Mengniu. Its 2012 revenues were $34 billion.