China National Cereals, Oil, and Foodstuffs Corp. (COFCO), China’s largest grains trader, has agreed to pay $1.5 billion for a majority stake in Noble Group Limited’s agribusiness unit. As part of the deal, Hopu Investment Management Co., a Chinese private equity firm, will partner with COFCO to provide one third of the investment for the agribusiness unit.
Together, the companies will form a joint venture that links Noble’s international commodities trading business with COFCO’s domestic processing and distribution operations. The joint venture will cut out trading intermediaries and give China direct access to global commodity suppliers.
Noble’s agribusiness operations include sugar mills in Brazil, soybean crushing plants in Argentina, Paraguay and Uruguay, and grain silos in Ukraine. Altogether, the unit has more than 13,000 employees and an audited book value of $2.8 billion, according to Noble.
The joint venture could provide a boost to Noble, which posted a 48 percent net profit loss for 2013. The company first expressed interest in an initial public offering (IPO) for its agribusiness unit in 2011. The IPO could have raised $700 million, but the deal fell apart as commodity prices began falling.
News of the COFCO-Noble talks comes just one month after COFCO made its first major overseas acquisition of a trading house by purchasing a 51 percent stake in Dutch agricultural trading house Nidera for nearly $1.3 billion. The two deals, with a total price tag of $2.8 billion, are the biggest overseas acquisitions in China’s grain sector, according to Reuters.