In July, Reuters reported that China’s state-run grain trader, COFCO, was seeking to increase its 51% stake in Dutch grain trader, Nidera, according to people close to the principal players in the decision. However, the group’s chairman, Ning Gaoning, told Reuters at the Asia Pacific Economic Cooperation (APEC) meeting in Manila, that the group does not plan to increase its stake.
Similarly, the group’s chairman also silenced rumors reported by Reuters in OCtober that Glencore was engaged in talks with COFCO and a Saudi Arabian sovereign wealth fund and Canadian pension fund about the sale of a stake in its agricultural assets, however, when asked to confirm if COFCO was interested in the purchase of Glencore’s assets, the group’s chairman, Ning Gaoning responded that “It’s not really in the market. They’re not selling.”
In a little more than a year’s time, COFCO has spent $2.8 billion, transforming the group through a joint venture with Noble Group Ltd’s agribusiness unit and Nidera, from one focused on procurement to a global-scale agricultural trader. At the same time the group also expanding its pig breeding, soybean crushing, and milling activities, and grew its branded foods interests including wine, chocolate, and edible oils.
On the back of this growth, Ning has previously stated that COFCO plans to list within three to five years, which if pursued, would launch COFCO into the exclusive group of globally dominant agricultural traders that includes Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus.
Original report:
COFCO Seeks to Increase Stake in Nidera
China’s COFCO has been involved in an aggressive program of expansion in global grain trading, investing just under $3 billion in 2014 to acquire majority stakes in both Noble Group and Nidera.
Now sources state that the state-run group is looking to build upon these investments, and is reportedly in talks to raise its stake in Nidera by at least an additional 15%. In addition, COFCO is working toward integrating the operations of Nidera and Noble Group with its own, eventually listing the agricultural assets of all three entities together prior to a planned initial public offering within the next three to five years. Exchanges being considered for the listing include Singapore, Hong Kong, and possibly Europe.
Such a move would shift COFCO into being a member of the elite “ABCD” group of globally dominant agricultural traders, which includes Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus.
COFCO’s original deal for the acquisition of its stake in Nidera included an earnout clause, which would allow COFCO to increase its stake in the company three years after closing if Nidera meets certain performance requirements. However, current talks are underway to renegotiate the timeline of this clause, bringing the timeframe forward after COFCO made clear it was seeking a larger stake in the company after Nidera missed certain performance targets.
Reuters reports that some sources are claiming that COFCO is seeking to increase its stake in Noble as well, however, the Noble deal did not include an earnout clause, and no comment has been issued by Noble on the possibility.