China's Cofco buys majority stake in Dutch grain trader Nidera to secure country’s food supply
03 Mar 2014
China's state-owned food giant Cofco Corp has struck a deal to acquire a majority stake in Dutch grain trader Nidera NV, for an undisclosed sum as part of its plan to secure the country's food supply.
Cofco, China's biggest grains trader, is buying 51 per cent of closely-held Nidera, which has generates revenue of more than $17 billion through selling around 33 million tonnes of grains a year.
The deal, which will require regulatory approvals from a number of countries, will be closely watched by global grain traders since Chinese regulators have always taken an eternity to approve overseas mergers in the industry and have put significant conditions in order to hamper deals.
Chinese regulators not only took nearly a year to approve the $5.6-billion acquisition of US grain merchant Gavilon by Japan's Marubeni, but passed it with significant long-term conditions, the merger may eliminate or limit competition in China's soybean importing market and wanted Marubeni and Gavilon to operate as separate trading units when selling soybeans to China, (See: Chinese regulators approve Marubeni-Gavilon merger with stiff conditions).
The Chinese regulator had also banned both companies from exchanging market information, which otherwise would be seen by the Chinese authorities as uncompetitive behaviour.
It also delayed the 2012 acquisition of Canadian grain hander Viterra by Swiss-based Glencore, which had blamed the Chinese regulators foe unnecessary delaying the deaL (China approves Glencore-Viterra $6.2 bn deal).
Australia's GrainCorp had agreed to compensate its shareholders for regulatory delays over its proposed sale to US-based Archer Daniels Midland last year, saying that Chinese merger approvals "tend to drag on longer than we would normally expect in the marketplace. Finally, the deal did not go through since the Australian regulator had blocked the deal on competition grounds.
Founded in Rotterdam in 1920, Nidera's early activities focused on grain and foodstuffs merchandising in the East Indies, Germany, UK, Russia, and Argentina.
Currently Nidera operates in 18 countries and distributes its products to more than 60 countries in the world.
The company's core business is processing, merchandising, trading, handling, storage and shipment of agricultural commodities and bio-energy products.
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.
The deal will give Cofco access to Nidera's global origination and trading network and its fast growing seeds business.
Patrick Yu, president of Cofco, said, ''We are delighted to reach a win-win agreement with Nidera. Nidera has a strong origination platform in Brazil, Argentina and Central Europe as well as a global trading network, which can further extend Cofco's global presence and create new opportunities.''
''This deal will generate great growth opportunities. The Chinese and Asian markets are of great importance to Nidera. We were looking for a strong partner to jointly invest in future growth and a strategic partnership with COFCO is an ideal choice for Nidera and will benefit both sides,'' said, Ton van der Laan, CEO of Nidera.
