Cofco, China's largest grain trader, agreed to pay $1.5 billion upfront for just over half of Noble Group's agricultural trading unit to broaden its access to food supplies.
The purchase highlights China's push to secure more food overseas as it juggles insufficient farming resources at home against a dependence on imports. It's the second such deal for Cofco this year after it agreed to buy a majority stake in Dutch grain trader Nidera in February.
"The transactions will strengthen Cofco's strategic importance to the Chinese government," as the "resultant access to Nidera's and Noble's agriculture assets overseas will allow China to better meet its increasing demand for agricultural products," Kai Hu, a senior credit officer with Moody's, said in a note.
The deal creates a venture that will be Cofco’s main base for sourcing food materials internationally, according to a statement from Hong Kong-based Noble, Asia’s biggest commodity trader by sales.
It will integrate with the food raw material processing assets owned by Cofco, Noble said.
Cofco will share the investment with an international group led by Hopu Investment, a private equity fund.
Hopu was set up by Fang Fenglei, the chairman of Goldman Sachs' Chinese securities venture.
Noble's chief executive Yusuf Alireza, who will head the operation on an interim basis, joined the Hong Kong trader from Goldman Sachs in 2012.
The initial payment of $1.5 billion will be adjusted to equal 1.15 times of the audited book value for the 51 per cent stake in the unit, Noble said. The unit has $2.5 billion of debt and sales of about $14.9 billion last year.
The transaction comes after a unit of Temasek, Singapore's state-owned investment company, last month offered to take over Olam International in a deal that values the company at 5.3 billion Singapore dollars. – ( Bloomberg )
