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CIC buys 15% stake in Noble Group
Published on: 2009-09-22
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Sept. 22 (Bloomberg) -- China Investment Corp., the nation’s sovereign wealth fund, bought a 15 percent stake in Noble Group Ltd. as the Hong Kong-based commodity supplier benefits from China’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 after losing money on financial firms including Blackstone Group LP and Morgan Stanley. 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$2.30 before they were suspended on Sept. 15 when it said it was in talks with an unspecified investor. The shares will remain suspended until Sept. 23.


Cash Rich


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 Web site. It trades commodities from aluminum to zinc and operates in more than 40 countries.


Noble will use S$926 million ($654 million) cash from the new shares to expand investment in global agricultural commodities, where it already supplies materials including soybeans, cocoa, sugar, 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.


Biggest Buyer


“What China needs, Noble helps to provide,” said Patrick Yau, an analyst Macquarie Group Ltd. in Hong Kong. He rates Noble stock as “neutral.”


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.


China’s aluminum imports have risen more than 14-fold this year, lead imports are up more than tenfold and copper has more than doubled, according to the nation’s customs.


Noble this year won control of Sydney-based Gloucester Coal Ltd. and ordered five bulk carriers for about $320 million to meet expected demand.


The Reuters/Jefferies CRB Index, which tracks 19 raw materials, gained 11 percent this year on signs that the global recession may be ending. The measure is rebounding after falling 36 percent last year, the biggest annual decline since at least 1957. The Baltic Dry Index, a measure of shipping costs for commodities, has tripled to 2,381 this year, boosted by shipments to China.


Temasek, Olam


Merrill Lynch (Singapore) Pte. Ltd. acted as the sole placement agent for Noble and JPMorgan Securities (Asia Pacific) Ltd. was CIC’s financial adviser, Noble said in the statement.


CIC’s investment in Noble comes after Temasek Holdings Pte, Singapore’s state-owned investment company, agreed to buy 13.76 percent of a Singapore-based commodities supplier Olam International Ltd. in new shares worth S$437.5 million in June.


The Singapore fund shifted to commodity investments after the crisis drove down the value of its stakes in Bank of America Corp. and Barclays Plc, causing it to report a profit that dropped a record 66 percent in the 12 months to March 31.


The value of Temasek’s investments fell 30 percent to S$130 billion in the year to March 31, the company said on Sept. 17. As of July 31, the value of its holdings recovered to S$172 billion, 7 percent below the March 2008 peak of S$185 billion, according to the report.

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