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Shares in Noble Group jumped on Tuesday as the commodities trader confirmed it was in talks with a strategic investor following a report indicating it was in early talks with China’s Sinochem about an equity investment.
Shares rose as much as 16.8 per cent in Singapore to S$0.225 following a report from Reuters claiming state-run enterprise Sinochem was in early talks with the company to buy a an equity stake in the international trading house.
The company later confirmed in a stock exchange filing that it was in “discussions regarding a possible strategic investment in Noble Group” with an unnamed party, but warned that there was “no certainty as to whether the transaction may be concluded”.
A person familiar with negotiations confirmed that Noble is in talks with Sinochem but cautioned that any final deal may not involve an equity stake.
The embattled commodities trader has fared badly amid a multi-year downturn in commodity markets as well as concerns over its accounting. The company’s credit rating has also been cut to junk.
It announced a second successive quarterly loss in November after passing on profitable trading opportunities to focus on cutting its debts. At the time Noble pointed to a fall in net debt to capital to 46.7 per cent as of the end of September, compared with 53.7 per cent at the end of June last year.
Margaret Yang, market analyst for CMC Markets Singapore, said of a potential deal with Sinochem: “A lot of Chinese state-owned companies have a lot of cash and are looking for overseas opportunities to expand their global presence. It makes sense for them to target Noble, since Noble has all sorts of problems – the share price has dropped 87% since 2011 – and the commodities downturn looks like it has bottomed out.”
Last year Sinochem acquired Halcyon Agri, a Singapore-listed rubber company, in a deal that created the world’s biggest natural rubber supply chain manager.