Summary
The question was who was looking to invest in Noble when it stopped trading. We now know that China Investment Corporation has invested $850 million in Noble to expand their agriculture supply business, boosting them into the big league.
Analysis
Noble Group, a company with over $36 billion in sales revenue last year has just announced the sale of $850 million of shares to the China Investment Corporation. This quickly ends speculation of who was behind the talks last week that led Noble to request trading in its shares in Singapore be halted last Tuesday, September 15th. The most interesting news coming out today is that these funds are destined to expand the company's agriculture investments in key agriculture markets globally. For CIC this means further investments in Argentina and Brazil to supply China's growing import market.
Noble competes in the agribusiness sector with companies such as Cargill, Archer Daniels Midland, Bunge Ltd. , Glencore and Louis Dreyfus. The company has been able to grow from its base in Hong Kong to become a major player thanks to the exit of Continental Grain and the rapid expansion of the Chinese import business. Noble's founder and CEO Richard Elman will be cashing out a cool $200 million dollars from this deal and at the same time the company will also receive the cash needed to continue the company's rapid global growth.
It will be interesting to see if any acquisitions will be in order, or if the company will be adding green field projects to its agriculture supply chain and processing business. Many companies in the sector have seen profits drop dramatically over the past 12 months from historically high levels as the global recession impacted demand of all commodities. Demand for food on a global basis is projected to double over the next 20 to 30 years, with new flows of grains and oilseeds opening opportunities for the remaining companies in this sector. It would seem that we have a new really serious big competitor in the global agribusiness sector after years of consolidation.
Gary Drimmer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
