COFCO assumes full control of grain trader
Acquisition part of agribusiness giant’s global expansion drive
Chinese State- owned grain trader COFCO Corp announced it will buy the 49% of Netherlands- based agri-business grain trader Nidera that it doesn’t already own a move that expertsp said on Wednesday highlights the agribusiness giant’s global ambitions. COFCO reached an agreement to buy the stake from cygne BV which will give the Chinese com-pany full owner ship of Nidera, COFCO said in a statement on its website on Tuesday. The transaction, which is still subject to regula-tory approvals is expected to be completed in the fourth quarter the statement said. COFCO required the 51 percent stake in Nidera in 2014 for $1.5 billion, according to media reports. it didnt disclose what it will pay for the rest. acquisition the nidera is not the only deal by COFCO in the international agribusiness market in recent years . In 2014, Singapore- listed com-modity trader Noble Group sold 51 percent of its agricultural unit to COFCO. In December 2015, Noble ag greed to sell the rest of the unit to COFCO. The latestl deal comes amid a plunge in global commod dity prices, including those of crops, which resultedd in a reported loss for the Dutch grain dealer in n fiscal 2015, its first in five years, said Ma Wenfeng g, an agriculture analyst with Beijing- based consultiing company Beijing Orient Agribusiness Consult ant Co. Ma said this could be the reason why Nidera accep pted the offer. MaM said the deal is also a milestone in COFCO O’s plan to expand into the global market, especiallye Europe and Latin America. “Following the acquisition, COFCO is one step closer to the big four leading agricultural traders – Archer Daniels Midland [ ADM], Bunge, Cargill and Louis Dreyfus Co [ LDC],” Ma told the Global Times on Wednesday, noting that this will help the company build itself into an international brand. It is also a move to concentrate its resources on developing COFCO’s main business, said Jiao Shanwei, editor- inchief of Zhengzhou- based grain portal cngrain. com. While COFCO is making aggressive ex xpansion moves in the global market, it’s sim multaneously streamlining its domestic operati ions. Thee company stepped upef ff fort st os las hunprofitablle and obsolete activities and cut employees earl ii er this year, according to media reports. Accor rding to a report on the website of the State- ow wned Assets Supervision and Administration Com mmission ( SASAC) on June 13, COFCO plans to o restructure or eliminate 20 percent of its subsidia aries in the next three years. It is targeting those th hat are irrelevant to its core business and don’t ma ake much profififit. “Thee move is in line with the goal of deepening State- ow wned enterprise reforms proposed by the SASAC in recent years,” Jiao told the Global Times on Wedn nesday. “Slim mming down” is necessary, as a large bureaucracyreaucrac and broad business scope have made it difficult for COSCO to improve its profit margins, experts noted. For example, the revenues of COFCO totaled 405.4 billion yuan ($ 62.4 billion) in 2015, more than those of Bunge. It was No. 4 after Cargill, ADM and LDC, domestic news portal jiemian. com reported on Wednesday. However, in terms of profifitability, COFCO still lags signifificantly behind its international competitors, said the report. “How to compete with those international brands is a major challenge COFCO faces in the wake of the deal,” said Jiao. COFCO should strive to improve its “soft power” by becoming more efficient and better managed, Ma noted.