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November 10, 2013 12:35 pm
Armajaro, the commodity and hedge fund group co-founded by Anthony Ward, the cocoa trader dubbed “Chocfinger”, is seeking a buyer for its cocoa, coffee and sugar trading arm.
Several suitors are understood to be circling Armajaro Trading, after a deal with a prospective buyer recently fell through, according to people familiar with the matter. The company was valued at about $200m-$300m last year, but a difficult trading environment for “soft commodities” such as cocoa, coffee and sugar, has since weighed on its profitability.
The trading arm could be broken up and sold separately to different buyers, according to people familiar with the situation.
Cocoa trading is capital intensive and margins have been volatile due to bad weather and bouts of political instability in key growing areas, while coffee and sugar prices have slumped due to plentiful supplies.
Some large agricultural commodity traders have been looking to shed their soft commodity operations. Bunge, one of the world’s biggest traders of agricultural commodities, recently put its sugarcane milling business on the block, while Archer Daniels Midland is in talks to sell its cocoa operations to Cargill.
London-based Armajaro came under the spotlight in 2010 when the hedge fund run by Mr Ward – a veteran in the cocoa trading business known in the industry for his high profile cocoa trades – bought a large quantity of cocoa beans, leading to a surge in prices. Over the past few years, he has been focused on his hedge fund, CC+, which along with other commodity funds are owned by Armajaro Asset Management, which sits alongside the trading arm, buying physical commodities from producers and selling to processors.
Mr Ward’s move away from the physical trading arm has coincided with difficult times for the operations. In the 12 months to September last year, Armajaro Trading reported a net loss of $10.3m, compared with a profit of $24.3m in the 17 months to the end of September in 2011.
In 2012, Mr Ward and co-founder Richard Gower, along with director David Tregar provided Armajaro Holdings, the parent group, with a capital injection of $20m through a share issuance.
The trading arm’s talks to buy Plexus Cotton, a Liverpool based cotton merchant, broke down earlier this year, while it changed two chief executives in quick succession this year.
It is unclear what would happen to the 6 per cent stake held by IFC, the investment arm of the World Bank, which invested in Armajaro Trading last year. Mr Ward and co-founder Richard Gower own the bulk of the company, with the remainder held by management and employees.
Armajaro declined to comment. The IFC was unavailable for comment.
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