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Cofco buys control of Nidera, fuelling deal spree

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China's Cofco supercharged its growth as a world force in grains by buying control of Dutch-based Nidera, extending a spree of deals aimed at exploiting growing world crop flows, and food security concerns.

State-owned Cofco, China's biggest grains trader, said that it had strengthened its position "as a key player in the global agricultural industry" by agreeing on Friday to buy 51% of Nidera, which sells some 33m tonnes of crops a year, and reaps annual revenues of more than $17bn.

"Investing in Nidera is in line with Cofco's strategy to become a global player in the agricultural industry with a fully integrated," the group's chairman, Frank Ning, said.

The deal will also marry a group based in China, the world's biggest importer of commodities including cotton, rubber and soybeans, with, in Nidera, a trading house with long-standing relationships in some of the world's top crop exporting countries.

Nidera, which was founded in the Dutch port of Rotterdam in 1920, has been trading in Brazil, a major exporter of the likes of corn, coffee, cotton, soybeans and sugar, since the 1950s, and in Argentina since the 1970s.

'Great growth opportunities'

Patrick Yu, the Cofco president, said: "Nidera has a strong origination platform in Brazil, Argentina and Central Europe as well as a global trading network, which can further extend Cofco's global presence and create new opportunities."

For Nidera, chief executive Ton Van Der Laan said that the deal "will generate great growth opportunities.

"The Chinese and Asian markets are of great importance to Nidera," which has offices in Shanghai and Singapore, besides in Mumbai in India.

While the groups declined to reveal the value of the deal, it has been reported to value Nidera at $4bn.

Regulatory hurdle

The companies said that they would now work together on obtaining regulatory approvals for the deal, which will be required from a number of different countries.

Ironically, it is Chinese authorities which have appeared a handicap to many recent grain trading, taking nearly a year to approve in April 2013 the takeover of US-based Gavilon by Japan's Marubeni, and only then when significant conditions.

These included an undertaking that Marubeni and Gavilon continue selling soybeans to China as separate companies, with two different teams, to prevent the combined group gaining undue hold over the country's important imports of the oilseed.

Swiss-based Glencore blamed Chinese authorities for delays to its 2012 takeover of Canadian grain hander Viterra.

And Australia's GrainCorp, in agreeing an ill-fated takeover by US-based Archer Daniels Midland last year, secured a mechanism to compensate its shareholders for regulatory delays, noting that "Chinese merger approvals "tend to drag on longer than we would normally expect in the marketplace".

However, Australian officials in November blocked the deal, on competition grounds.

Flows grow

Cofco's deal also follows in grain handling deals including the purchase earlier this month by Japanese trading giant Sumitomo Corp of full ownership of Australian grain merchant Emerald Grain.

US farm co-operative CHS last year purchased a 50% stake in Australia's AgFarm.

Many deals have been aimed in particular at exploiting the growing trade flows of crops to Asia from exporting regions such as South America and the former Soviet Union.

World trade in wheat and coarse grains in 2013-14 is estimated by the International Grains Council at 286m tonnes, up 7.9% year on year, with a further 108m tonnes, up 11.3%, in trade in soybeans before factoring in other crops such as cotton, rice, rapeseed and sugar.

Big operator

Cofco, which employs some 120,000 staff, has made only small deals abroad up to now, such as the Aus$136m purchase of Australian sugar producer Tully Sugar in 2011.

Domestically, it is the biggest shareholder in China Mengniu, China's top dairy group, and also includes drinks group China Foods oilseeds processor China Agri-Industries Holdings in its portfolio.

Nidera – which took its name from its original major business areas, the Netherlands, the (East) Indies, Deutschland (Germany), England, Russia and Argentina - employs some 3,800 people in 20 countries.

By Agrimoney.com

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