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Cofco sells Nidera Seeds, extending shake-up in the face of growth pains

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Cofco International sold its Nidera Seeds business in the latest step in the shake-up at the Chinese state-backed agricultural trading giant, following setbacks to a strategy of global expansion.

 

Cofco said it had sold Nidera Seeds, which operates in Latin America, to Syngenta, the seed giant purchased earlier this year for $44bn by another Chinese state-backed enterprise, ChemChina.

 

“Syngenta is well placed to provide Nidera Seeds a strong platform for further long-term growth, creating best value for its customers, farmers and employees,” said Johnny Chi, the Cofco chief executive.

 

He added that “this agreement is an important step of our strategy to focus on our major businesses”.

 

Expansion drive hits bumps

 

The deal comes amid a wave of restructuring among world grain traders amid a period of margin pressure spurred, ironically, by large crop supplies, which have depressed volatility and weighed on trading margins.

 

Both Archer Daniels Midland and Bunge, two of the world’s top four ag traders, last week revealed progress in restructurings and cost cuts, with the latter saying it was considering a stockmarket flotation for a Brazilian sugar business it has long been seeking to cut its exposure to.

 

However, for Cofco, the quest for a shake-up has an extra dimension, with the group seeking to tidy up its portfolio after a series of acquisitions earlier in the decade, in a quest to improve China’s presence in agricultural commodities trading, and cut its reliance on foreign operators.

 

The group in 2014 kicked off the acquisitions of both Noble Agri and Nidera, the Dutch-based trader of which it in February gained 100% control.

 

Cofco has encountered some bumps in its expansion drive, notably in South America, with reports late last year of a $150m hole in Nidera’s accounts, run up in Brazil, and talk more recently of hiccups in merging Nidera and Noble Agri in Argentina.

 

Portfolio shake-up

 

Under the leadership of Mr Chi, who was appointed chief executive in January, Cofco has undertaken deals including the sale of the Nidera Seeds sorghum business to US-based Chromatin, announced in May.

 

Three weeks ago, Cofco shook up its biofuels portfolio, with the sale by its listed China Agri-Industries Holdings subsidiary of two biofuels businesses to Cofco Bio-chemical Investment for HK$8.58bn, equivalent to about $1.1bn.

 

And a week before, China Foods, another listed subsidiary of Cofco, revealed the sale of Cofco Wines & Spirits to another part of the trading giant’s empire.

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