Noble raises $750m from sale of agribusiness stake
Noble Group, the commodity trader fighting allegations of aggressive accounting, has raised $750m from the sale of its stake in an agricultural joint venture with Cofco, China’s state-backed grain trader.
Shares in the company, which is listed in Singapore, rose as much as 5.7 per cent on Wednesday morning following the news.
The Hong Kong-based company has been scrambling to raise cash to avoid losing its investment grade credit rating, which is crucial to the profitability of its core business of moving millions of tonnes of raw materials around the world.
Noble had been given until early next year by rating agencies Moody’s and Standard & Poor’s to raise at least $500m in cash or face being cut to junk status.
“After completion of this transaction, Noble Group’s financial metrics will be well in excess of those required for an investment grade credit,” the company said in a statement on Tuesday.
However, the company will be forced to book a $546m loss on the sale of its stake in Noble Agri, which was valued on its balance sheet at $1.34bn. This will “materially” affect its profits for the year to December, the company said.
Noble Agri employs about 12,000 people in 25 countries, and includes operations ranging from oilseed crushing plants in China to sugar mills in Brazil. In May it hired Matthew Jansen of Archer Daniels Midland as its chief executive.
The business has been a drag on Noble Group’s earnings this year, which have fallen in spite of a strong performance in its North American oil business.
It operated at a loss in the nine months to September, hit by weak sugar prices and rain which affected the harvest in Brazil.
Proceeds from the sale could rise a further $200m if Noble Agri is sold or listed on a stock market by Cofco. Noble will also be released from guarantees over a $2.55bn borrowing facility.
Cofco paid $1.5bn for its 51 per cent stake in Noble Agri last year. It subsequently placed the holding, along with its stake in Dutch grains trader Nidera, into a new company with China Investment Corp, the sovereign wealth fund.
This was part of a plan to create an integrated international agricultural trader with the muscle and reach to compete with the agricultural “ABCDs” — Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus Commodities.
At an FT conference in Switzerland earlier this year, Ning Gaoning, Cofco’s chairman, laid out plans to turn the company into a publicly listed global powerhouse.
He said he wanted Cofco to be an international company, adding that he planned to expand in North America, a big surplus grain producer.
“I have said since we acquired our initial stake in Noble Agri that we have every confidence in its vision and its new leadership,” Mr Ning said.
“In terms of our expectations in the critical global agribusiness sector, I trust our decision to acquire 100 per cent speaks for itself.”
For Noble the sale brings to a close a difficult year in which its share price has fallen 61 per cent, reducing its market value to $2.1bn, because of questions over its accounting practices and its inability to generate cash consistently.
A group called Iceberg Research — which Noble claims is the work of a disgruntled former employee — alleged that the company inflated asset values and booked profits on deals long before receiving any cash from them.
Noble has defended itself against the accusations and had PwC review how it accounted for its long-term commodity deals. The auditor concluded the deals fell within international standards.
“We are delighted to have been able to enhance our liquidity significantly while also delivering on our commitments,” said Noble’s chief executive Yusuf Alireza.