atans1

Noble: Time to cheong?

In China, Commodities on 08/04/2014 at 4:25 am

Well depends on whether COFCO will run the joint venture as a commercial entity.

The structure allows Noble to reduce its exposure to an underperforming business while sharing in any recovery. The prospect of a deal had already fuelled a 25 percent rally in Noble’s shares in the past month, lifting its market value to around $6.5 billion. The proceeds could be reinvested in Noble’s better-performing energy and resources businesses. And because Noble will no longer have to include the venture’s $2.5 billion of net debt on its balance sheet, its headline borrowings will roughly halve, according to Eikon.

For Noble investors, the lingering worry is whether or not COFCO, which is already China’s main wheat importer, will run the joint venture as a commercial entity. The involvement of China-focused private-equity group HOPU in the Noble deal offers some comfort. So does China Investment Corporation’s 14 percent stake in Noble, which it has owned since 2009. If China does decide to squeeze Noble, it shouldn’t do so too hard.

http://blogs.reuters.com/breakingviews/2014/04/02/noble-china-joint-venture-still-faces-market-test/

At a recent conference, Yusuf Alireza, the chief executive of Noble, talked business models: “None of us should be arrogant to assume one model is right and one model is wrong . . . from a Noble perspective, our core competence is in the middle part of the supply chain . . . We are not miners, we are not farmers, we are not a bank.”

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