COFCO

Chinese Cofco is Preparing for an IPO After Trader Acquisitions

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October 31, 2014

China’s largest state-run grain-trading company, Cofco Corp. is preparing for an initial public offering (IPO). The company plans to list the agriculture assets it acquired earlier this year with the help of Chinese and international private equity investors. The agro-technology assets under the IPO plan include Nidera B.V. and Noble Group.

 

The company acquired a 51% majority stake of the Dutch grain trader and seed developer Nidera earlier in February. Noble Group deal took place during April, with Cofco taking a 51% stake of the Singapore-listed agricultural processing and trading unit. According to MarketWatch, the deals were worth a total of $3 billion. Bot of these deals were the biggest in Chinese food industry.

 

Now the company has announced its plans to launch an international joint venture, including the above assets, and eventually listing it to the stock market.

 

The company has been aggressively moving towards the international markets, with the company looking into anything “from cooking oil to chocolate”. In the past years, it has acquired companies such as the Chateau Viaud in Bordeaux and Biscottes in Chile.

 

In addition, the company has worked closely with foreign partners, especially with private equity investors. These include mergers and acquisitions made together with private equity giant KKR.

 

The Financial Times reported that the IPO might take up to three years to conclude. According to Cofco’s chief executive, Frank Ning, the IPO won’t happen overnight because, “We have to be one company. One, single, diverse and also centrally-managed company. It takes time”. The Financial times also noted that the international joint venture will be a “vertically integrated agribusiness rather than a simple grain trader”.

 

Yet, there might be some trouble ahead due to the complexity of joint ventures. For example, the company has five listed units in Hong Kong, but it remains unclear whether any of these will be included into the new joint venture. For the Nidera and Noble deals, the company worked closely together with an investment consortium that included Chinese private equity firm Hopu investment, International Finance Corp, the private equity unit of Standard Chartered and the Singapore state-owned asset manager Temasek. All of this complicates the situation.

 

Bloomberg reported that the aggregated revenue for Cofco would be close to $63.3 billion after the deal, with $57 billion worth of assets. China Money Network also quoted Ning saying, “in seizing this opportunity, COFCO is aiming to establish itself as a global player with a fully integrated value chain worldwide”.

 

The move is the latest by Chinese state-run companies acquiring and merging with international food assets. Previously the focus has mostly been in assets such as metals and energy. The focus on food assets is most likely due to the increased wealth, which has led to an increase demand for food resources.

 

Indeed, Mingjian Bi from the private equity firm Hopu Investment, pointed out in the MarketWatch article that, “International trade in grain and food is growing, due to economic growth in Asia and increasing agricultural production in the Americas and Eastern Europe”. Cofco has told that it isn’t planning to acquire any more assets in the near future, but other private equity backed deals in the region might well take place in the near future.

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