Noble Group shares jump 17% after confirming talks on potential strategic investment

The Noble Group signage sits on display outside during an investor day in Singapore.
The Noble Group signage sits on display outside during an investor day in Singapore.PHOTO: BLOOMBERG

SINGAPORE/LONDON (REUTERS, BLOOMBERG) - Shares in Noble Group leapt as much as 17 per cent on Tuesday (Feb 14) to the highest in eight months after the commodities trader confirmed it was holding talks on a possible strategic investment in the firm.

Noble was the most actively traded stock on Tuesday morning, and was trading at 22 Singapore cents, up 11.7 cents at 10:10am, with some 269 million shares changing hands.

China's state-owned Sinochem is in early talks with Noble to buy an equity stake, a move that would help it gain access to the Singapore-listed trader's global supply chain, Reuters reported on Monday.

In response to the story, Noble told the Singapore exchange on Tuesday that it was in talks but did not give details.

"The board wishes to advise that Noble Group is currently engaged in discussions regarding a possible strategic investment in Noble Group," it said.

"However, no binding arrangements have as yet been entered into with respect to this possible transaction and, accordingly, there can be no assurance that this transaction will be concluded."

The conversations between Sinochem and the Hong Kong-based trading house are still at an early stage, the people said on Monday. Sinochem is interested in the international energy trading business of Noble Group, which includes oil, coal and natural gas.

Noble chairman Richard Elman said last year that the company was looking for a strategic investor after it raised US$500 million in fresh equity in June.

"A strategic partner is still very possible," Elman, who is due to stand down later this year, said in a Bloomberg News interview in September. "But it has to be at the right time and the right candidate.

Noble feels it's now in a stronger position to negotiate a deal for a strategic investor, with its equity price stabilizing and bond prices rising strongly, according to one of the people.

The yield of Noble's bond maturing in 2020, which moves inversely to its price, fell last week below the key 10 per cent level for the first time in more than a year, compared with an all-time high of more than 35 percent in January 2016.

Noble has been fighting to prop up its finances after a torrid 2015 and 2016 during which its share price collapsed amid attacks on its accounting and the first yearly loss in almost two decades.

The trouble started in February 2015, when a group called Iceberg Research criticized Noble's accounting. The company dismissed the allegations as the work of a disgruntled ex-employee and started litigation against him.

For months, the trading house sought to fend off the attacks, but as writedowns mounted, it changed course. Former Chief Executive Officer Yusuf Alireza quit in May and days later the company announced the emergency rights issue and said Elman would step down within 12 months. Jeff Frase and William Randall were appointed new co-CEOs.

The company has long-standing ties with Chinese state-owned entities, including China Investment Corp, the nation's sovereign wealth fund and one of Noble's largest shareholders. In the June rights offer that raised US$500 million, CIC took its full allocation of shares and got a second seat on the board.

In another fund-raising move, the company last year sold its remaining 49 per cent stake in the Noble Agri Ltd business to China's Cofco Corp for US$750 million in cash.