China Investment Corp (CIC), the nation's sovereign wealth fund, has bought a 15-percent stake in Noble Group Ltd as the commodity supplier benefits from the country's demand for coal, iron ore and soybeans.
Noble will sell $850 million worth of new and existing shares to CIC at 8.1 percent less than the last traded price. The sale includes 135 million shares owned by Chief Executive Officer Richard Elman and 438 million new shares, the Hong Kong-based company said in a statement.
CIC is increasing investments in commodities. Noble's second-quarter profit doubled as China boosted raw material imports to fuel $586 billion of stimulus spending needs.
"CIC started accelerating its overseas investment pace in the most recent three to six months, they are showing a clear direction, that is from paper assets to commodities," said Zhang Zhiming, director of asset allocation research at HSBC Holdings Plc in Hong Kong. "If they hold long-term positions in commodity assets, they need a trading house."
Noble has more than doubled, making it the fourth-best performer on the Straits Times Index. The company's shares traded at S$2.3 before they were suspended on Sept 15 when it said it was in talks with an unspecified investor. The shares remain suspended until yesterday.
CIC, which will pay S$2.1137 for each Noble stock, has been buying shares in the property and resources sectors in recent months. The fund had 87.4 percent of its assets of $297.5 billion invested in cash or equivalents last year, it reported last month.
A CIC spokeswoman confirmed the deal, adding it still needs approval from Noble's board. Noble, founded in 1987 by Elman, owns mines, farms, ports, processing facilities and ports, according to its website. It trades commodities from aluminum to zinc and operates in more than 40 countries.
Noble will use S$926 million cash from the new shares to expand investment in global agricultural commodities, where it already supplies materials including soybeans, cocoa, coffee and sugar. Sales from its agricultural business dropped 30 percent to $3.38 billion in the first half of this year, accounting for a quarter of its total revenue of $13.3 billion.
China is the world's biggest buyer of commodities including soybeans, soybean oil, cotton, iron ore, aluminum, copper and zinc. The country's demand for commodities "is back on track in a very big way", CLSA Research Ltd said last week.
(Agencies via China Daily September 23, 2009)
