China COFCO Bought 51% Stake in Noble Agriculture Unit
China's largest grain trader, state-owned COFCO Corp., and mainland private-equity firm Hopu Investment Management Co. are buying a majority stake in Noble Group Ltd's agribusiness division for $1.5 billion and forming a joint venture, as China continues to build its footprint in the global food market.
The COFCO-Hopu consortium will take a 51% stake in the joint venture, while Singapore-listed Noble Group, will hold the remaining 49% stake in the agriculture unit. This is the latest billion-dollar-plus transaction made by COFCO, which recently agreed to buy 51% of in Dutch grain trader Nidera, giving it greater control over pricing and better access to major grain-growing regions, such as Latin America and Russia.
Noble Group said early in March that it was in discussions with a consortium over a joint venture of its agribusiness division, which has been hit by falling commodity prices. Noble, which is 15% owned by China's sovereign-wealth fund China Investment Corp., or CIC, trades agricultural commodities from grains and oilseeds to cotton and distributes products in Asia and the Middle East. China, a huge importer of soybeans from Argentina and Brazil, has also been investing in agriculture in Eastern Europe.
Little-known outside China, COFCO, which was founded in 1949, has been Beijing's go-to company for years when it wants to import U.S. corn or Australian wheat. The revenues of the state-run firm were $34 billion in 2012. Hopu is a private-equity fund originally set up by Fang Fenglei, Goldman Sachs Group Inc. GS -2.87% 's China partner, and backed by Goldman and Singapore's Temasek Holdings Pte. Ltd.
COFCO, which will take a two-thirds majority in the investment partnership with Hopu, sees the joint venture as a way to grow both businesses. "Noble Agri's supply-chain management system and origination capabilities complement Cofco's logistics, processing, and distribution network in China," Frank Ning, chairman of COFCO, said in a statement. "Incremental trade volumes from COFCO as a strategic investor will create significant synergy and value." China's growing wealth is prompting increased demand for food. In 2011, China became a net importer of rice, and the gap between exports and imports has been widening in recent years. Chinese imports of soybeans overtook domestic production in 2004. The country also imported record volumes of corn in December, mostly from the U.S., with most of that going toward feed for animals.
This is COFCO's second big transaction this year, after the Nidera deal. The total enterprise value of Nidera is around $4 billion, according to people familiar with the matter, so the value of Cofco's stake is around $1.2 billion. Having stronger ties with food traders like Nidera and Noble has the potential to make the pricing of grains more transparent to Cofco. Mr. Ning will be the chairman of Noble Agri, while Richard Elman, founder and chairman of Noble Group, will take on the role of deputy chairman, the companies said.
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