Noble reaches deal to sell rest of farm unit to Cofco for S$1.05b in cash, shares rise

Singapore-listed Noble Group sold the company's remaining 49 per cent in its agriculture unit to China's Cofco Corp for at least S$1.05 billion in cash.
Singapore-listed Noble Group sold the company's remaining 49 per cent in its agriculture unit to China's Cofco Corp for at least S$1.05 billion in cash. PHOTO: REUTERS

SINGAPORE - Singapore-listed Noble Group, the commodity trader battling to keep its investment-grade credit ratings, has sold its remaining 49 per cent in its agriculture unit to China's Cofco Corp for at least US$750 million (S$1.05 billion) in cash.

In addition to the upfront payment, it may receive as much US$200 million in additional amounts depending on the future growth of the unit, Noble Agri, the company announced before trading opened on Wednesday (Dec 23).

"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.

It added that the disposal means it now "exceeds capital raise targets", with the entire proceeds to be used to pay down debt.

Noble said in a separate slide presentation that its adjusted net debt would drop to US$1.76 billion after the sale, from US$2.51 billion beforehand.

Cash on hand would be US$2 billion and liquidity headroom would be US$2.7 billion.

Noble shares rallied when trading opened on Wednesday, rising as much as 4.5 per cent. At 9:21 am, the stock was trading 3.4 per cent higher at 45.5 Singapore cents, after touching 46 cents, their highest since Nov 13.

Noble said the sale will also end the need for it to provide the corporate guarantee which had previously supported Noble Agri's borrowing, releasing a liability which was taken into account in its rating metrics.

"The transaction also ensures that the group has comfortably exceeded its commitment, which was made six weeks ago, at the time of its Q3 2015 results announcement, to generate in excess of US$500 million from asset disposals and/or other strategic/financial transactions," said the statement.

"In pursuit of its strategic transformation to an asset light business model, Noble has now received in excess of US$4 billion in cash from the divestment of Noble Agri and the 2012 merger of Gloucester Coal with Yancoal over the last four years," it said.

Sad Noble Group CEO Yusuf Alireza: "We are delighted to have been able to enhance our liquidity significantly while also delivering on our commitments."

"The structure of the transaction, over and above the cash receipts, allows us to participate in the continued build out of a world class multi flagged global agri business."

Cofco, China's largest food company, already owns the other 51 per cent in Noble Agri, which it bought for about US$1.5 billion in 2014. The Beijing-based company said it aims to build a global agriculture trading operation to rival leading traders such as Cargill Inc.

In recent months, Standard & Poor's and Moody's Investors Service had said that they may reduce Noble's credit rating to junk if its liquidity position did not improve. Noble said six weeks ago it planned to raise US$500 million through asset sales to avoid that fate.

Noble stock has fallen 61 per cent this year in Singapore after US short-seller Muddy Waters and an anonymous group called Iceberg Research published reports criticizing the company's accounting.

Noble denied the allegations and hired PricewaterhouseCoopers to conduct a third-party review of its accounting. PWC published the report in August and said Noble complied with international accounting standards, while also recommending improvements in governance standards and the methodology used to value long-term contracts.

Noble American depositary receipts rose 3.7 per cent to US$6.19 in over-the-counter trading in New York on Tuesday after the announcement of the Cofco deal.

The Noble-Cofco deal is subject to approval by the Australian Foreign Investment Review Board.