COFCO in talks to buy Noble agribusiness arm: report

China's biggest grains trader COFCO Corp is in talks to buy Noble Group Ltd's agribusiness arm in a deal that would value the division at around $1 billion, Reuters reported Tuesday, citing people familiar with the matter.

Acquiring the Noble unit would help China develop a powerful agricultural trading house, an entity the country has lacked. Chinese trading firm Unipec is already one of the world's biggest crude oil buyers.

State-backed COFCO, which last week agreed to buy a 51 percent stake in Dutch grain trader Nidera, is conducting due diligence on the Noble unit, said the sources who declined to be identified because the matter is not yet public.

The precise stage of the talks was not clear, the people said, cautioning that a deal may or may not materialize for the unit which trades and processes grains.

Singapore-listed Noble shares jumped as much as 8.6 percent to S$1.075, the highest since January 2, adding around $450 million in market value.

Noble Group said in a statement that it was currently engaged in discussions with a consortium over a potential joint venture around its agriculture business, but no binding arrangements had yet been entered into. The Noble statement did not identify COFCO as part of the consortium.

A COFCO spokesman said he was not aware of talks with Noble.

An acquisition push by State-run COFCO comes after a wave of consolidation in the global agribusiness sector - including deals by Japanese firms to snap up rivals - that has largely passed China by.

The Nidera acquisition is COFCO's first major overseas purchase of a trading house and signals China's ambition to create a global trading company along the lines of Japanese, European and US trading giants.

Last year, Japanese trading house Marubeni Corp agreed to pay $5.6 billion for US grain merchant Gavilon while Glencore bought Viterra Inc, Canada's largest grain handler, for $6 billion in 2012.

"Noble has been trying to sell their agribusiness business for a while but we are not sure what COFCO will gain out of it," said an industry analyst in Australia.

"The consolidation in the industry has already taken place and it seems like they are trying to get hold of what is available."

Noble is one of Asia's so-called NOW commodity traders, along with Olam International Ltd and Wilmar International Ltd, challenging the ABCD majors - Archer Daniels Midland, Bunge, Cargill and (Louis) Dreyfus - which dominate grain flows.

Noble, which is 14 percent owned by sovereign wealth fund China Investment Corp, trades sugar, coffee and raw materials like iron ore.

Its agricultural division is the smallest and generated $15.5 billion revenue last fiscal year, accounting for about 16 percent of the total.