Commodities trader Noble sells farm stake to COFCO for $750M

Embattled commodities trader Noble Group said Wednesday it has reached an agreement to sell its 49 percent stake in Noble Agri to Chinese state-owned giant COFCO International for $750 million.

The sale comes a month after ratings agencies Moody's and Standard and Poor's said they were reviewing the company's investment grade rating due to liquidity concerns.

Noble chief executive Yusuf Alireza said in November that the company was seeking to raise $500 million through asset sale and strategic transactions, so the cash deal with Cofco ensures that Noble has "comfortably exceeded its commitment", the company said in a press release.

The entire proceeds of the disposal will be used to pay down debt, the company added. Noble shares surged as much as 5.7 percent Wednesday on news of the sale.

"After completion of this transaction, Noble Group's financial metrics will be well in excess of those required of an investment grade credit," the company said

The Hong Kong-based company has been under scrutiny since February after Iceberg Research published a report, alleging that the Singapore-listed trader's accounting treatments were "unusual," result in "fabricated" profit and "intentionally misleads credit agencies and investors."

Noble's shares have fallen 60% since, despite Wednesday's sharp rise.

In November, Noble reported third-quarter net profit fell 84 percent to $24.7 million from a year earlier on a nearly 20 percent drop in revenue to $18.7 billion.

Noble and COFCO entered a joint venture in 2014 when the Chinese grain trader paid $1.5 billion then for a 51 percent stake in the Hong Kong-based trader's agribusiness.

With the sale to COFCO this week, Noble will exit the agriculture business to focus on its two larger divisions in energy and metals.

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Meanwhile, with its purchase of Noble Agri, COFCO looks to challenge the traditional big-four trading houses from the west that are collectively known as ABCD: Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus.

COFCO chairman Frank Ning said in a statement on its website that the acquisition will help drive the internationalization of the conglomerate's business and aid its global strategy.

S&P said in a note Wednesday that Noble's rating is not immediately affected by the sale of Noble Agri.

Although the proceeds would improve the company's financial leverage and liquidity position, the full sale of the agriculture unit "could weaken Noble's business position, including its business diversity and long-term competitiveness".

Deutsche Bank analyst Colin Tan said although the sale of the JV may help Noble's credit rating, the rating outlook may still be negative due to the weak state of the commodities market now.

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