Noble Group sells rest of farm unit to Cofco for US$750m

[LONDON] Noble Group Ltd, the embattled commodity trader that's trying to hold on to its investment-grade credit ratings, sold the company's remaining 49 per cent in its agriculture unit to China's Cofco Corp for at least US$750 million in cash.

Noble said in a statement on Wednesday that in addition to the upfront payment, it may receive as much US$200 million in additional amounts depending on the future growth of the unit, known as Noble Agri.

"The entire proceeds of the disposal will be used to pay down debt," Hong Kong-based Noble said.

Cofco, China's largest food company, already owns the other 51 per cent in Noble Agri, which it bought for about US$1.5 billion in 2014. The Beijing-based company aims to build a global agriculture trading operation to rival leading traders such as Cargill Inc.

In recent months, Standard & Poor's and Moody's Investors Service have said that they may reduce Noble's credit rating to junk if its liquidity position doesn't improve. The trader said six weeks ago it planned to raise US$500 million through asset sales to avoid that fate.

Noble said on Wednesday it would tentatively take a non-cash loss of US$546 million as it carried a higher valuation for Noble Agri on its books than the sale price.

Still, the trader said the cash injection from the sale would strengthen its balance sheet above the investment-grade threshold that both S&P and Moody's use.

Noble said in a separate slide presentation that its adjusted net debt would drop to US$1.76 billion after the sale, from US$2.51 billion beforehand.

ACCOUNTING ALLEGATIONS

Noble stock has fallen 61 per cent this year in Singapore after short-seller Muddy Waters LLC and a group called Iceberg Research published reports criticizing the company's accounting. Noble American depositary receipts rose 3.7 per cent to US$6.19 in over-the-counter trading in New York on Tuesday after the announcement of the Cofco deal.

Noble denied the allegations and hired PricewaterhouseCoopers LLP to conduct a third-party review of its accounting.

PWC published the report in August and said Noble complied with international accounting standards, while also recommending improvements in governance standards and the methodology used to value long-term contracts.

Cofco, which also bought last year a majority stake in Dutch grain trader Nidera BV, would become after the completion of its latest deal one of the world's largest traders of agricultural commodities such as wheat and soybeans.

The Chinese company is known within the industry by the initials "CNN," which stand for Cofco, Noble Agri and Nidera.

"The consolidation of our ownership is a strong step towards our guiding vision: to be a multi-flag world class global agri-business," Noble Agri Chief Executive Officer Matt Jansen said.

Cofco will still have to battle with the four top grain traders, collectively known as the ABCDs: Archer-Daniels-Midland Co, Bunge Ltd, Cargill and Louis Dreyfus Commodities BV.

The Noble-Cofco deal requires approval by the Australian Foreign Investment Review Board.

BLOOMBERG