July 9, 2015 / 12:12 PM / 5 years ago

Exclusive - China's COFCO in talks to raise stake in grain trader Nidera: sources

LONDON (Reuters) - China’s food giant COFCO [CNCOF.UL] is ready to increase its stake in Dutch grain trader Nidera, speeding up a deal which will help its transformation into a global agricultural trader, sources familiar with the matter told Reuters.

The state-run company acquired 51 percent of Nidera in February last year. Two sources said discussions were now underway for COFCO to increase its stake by buying at least a further 15 percent.

COFCO has embarked on an aggressive expansion into international grain trading, having invested $2.8 billion (1.82 billion pounds) in 2014 via joint ventures with Noble Group (NOBG.SI) agribusiness and Nidera, after taking substantial stakes in the companies.

Sources say it is now looking to build on those steps, integrating operations of the three entities, ahead of plans to eventually list all of COFCO’s, Noble’s, and Nidera’s agricultural assets together.

The move would catapult COFCO into the select “ABCD” stable of companies dominating global agricultural trade: Archer Daniels Midland (ADM.N), Bunge (BG.N), Cargill [CARG.UL] and Louis Dreyfus [LOUDR.UL].

COFCO’s deal with Nidera included an earnout clause, which could see the 51 percent stake increase after three years depending on Nidera’s performance, one of the sources said.

But that clause is now under discussion as the parties consider bringing forward the three-year timeframe with a conclusion as soon as possible, with COFCO wanting a larger stake after Nidera missed targets in its results following the $1.5 billion deal, the source added.

COFCO and Rotterdam head-quartered Nidera declined to comment.

As Nidera is a private company it is not obliged to publish detailed financial results.

Some sources said COFCO was also interested in raising its stake in Noble, although this deal did not include an earnout clause. Noble declined to comment.

“COFCO intend to integrate Noble and Nidera by the end of this year, that could mean that they buy the remaining shares of both companies,” said an industry source, adding that COFCO was currently undertaking a new valuation of the assets of both firms, which could indicate that this is its intention.

“It is logical that they take 100 percent of the companies prior to an IPO.”

COFCO is targeting an IPO of the combined entity in the next three to five years.

One of the sources said the new company would not be head-quartered in Asia, but locations including Rotterdam and Switzerland were possibilities.

Exchanges being considered for the listing included Singapore, Hong Kong and somewhere in Europe, the source added.

The investments in Noble and Nidera marked the biggest overseas acquisitions by China’s grain sector, giving COFCO assets in some of the world’s top grain and vegetable oil producing regions, including Brazil, Argentina, Indonesia and the Black Sea area and enabling it import food supplies into China independently of the top global operators.

Additional reporting by Anshuman Daga in Singapore and Nui Shuping in Beijing; Editing by Veronica Brown and David Evans

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