COFCO in Talks with Noble and Hopu to Form Joint Venture

By E.J. Thomas

China National Cereals, Oil, and Foodstuffs Corp. (COFCO), China’s largest grains trader, is in talks with Singapore-listed Noble Group Ltd. and Hopu Investment Management Co. to form a joint venture with Noble’s agribusiness operations, according to the Wall Street Journal.

The agribusiness operations under discussion involve Noble’s sugar mills in Brazil, soybean crushing plants in Argentina, Paraguay and Uruguay and grain silos in Ukraine.  Along with these operations, the deal would also involve Noble’s network of ports and commodity terminals. Reuters reports that the deal will value Noble’s agribusiness operations at $1 billion.

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 week after COFCO made its first major overseas transaction of a trading house by purchasing a 51 percent stake in Dutch agricultural trading house Nidera for nearly $1.3 billion. COFCO’s interest in Nidera and Noble suggest that the state-owned company is looking to get closer to grain sourcing while also having more involvement in pricing.

At this time, it is not clear what percentage equity stake COFCO and Hopu will have in the joint venture. However, the Wall Street Journal reports that COFCO will hold a larger share than Hopu. Hopu, a private-equity fund set up by Goldman Sachs Group Inc.’s China partner Fang Fenglei, has worked with COFCO previously. In 2009, the two teamed up to take a 20 percent stake in China Mengniu Dairy Co.