Sinochem No Longer Pursuing Stake in Noble Group

China's state-owned Sinochem is no longer pursuing an investment in Noble Group Ltd (NOBGF.PK) due to concerns over the finances and business outlook of the loss-making commodity trader, three sources familiar with the matter told Reuters.

 

When it held talks with Noble earlier this year to buy a stake, Sinochem's thinking, sources have told Reuters, was that a deal could help the oil, gas and petrochemicals producer to become a globally active energy trader.

 

But Sinochem has become cautious about linking up with Noble after the trader posted a shock quarterly loss this month and warned that it would not be profitable for the next two years. This sparked a rout of its shares and bonds and triggering cuts in outlooks by rating agencies.

 

The Sinochem move, the only large-scale name publicly linked to Noble in recent times, is a setback to the commodity trader. It comes at a time when it is set to negotiate a crucial rollover of a $2 billion credit facility secured on its inventories and working capital.

 

Noble has been wracked in the past two years by a steep downturn in commodities markets, management overhauls and allegations of improper accounting, which the company has steadfastly rejected.

 

Sinochem, which has not commented on its interest in a Noble stake, did not immediately respond to a request for comment.

 

An external spokeswoman for Noble declined to comment and referred Reuters to the company's statement on Feb. 14 when Noble had said it was in discussions regarding a possible strategic investment in the company but no binding arrangement had been entered into.

 

It said when announcing its quarterly loss this month that it was still in talks with strategic investors.

 

The sources declined to be identified due to the sensitivity of the matter.

 

Noble specialises in shipping and storage logistics, rather than owning large production assets or refineries, and is also a major player in gasoline blending in the United States.

 

Sinochem's move to drop the Noble investment proposal also stems from its own heightened focus on "domestic priorities" and due to the increased scrutiny of overseas investments by Chinese state-owned enterprises, one of the sources said.

 

China's State Council last year unveiled rules under which managers at state-owned firms could be held accountable if deals resulted in a loss of state assets.

 

The source said, though, that it does not mean Sinochem's talks with Noble can't be revived in the future.

 

Noble founder, Richard Elman, who set up the group with $100,000 three decades ago, and stepped down this month as executive chairman to become chairman emeritus, is the company's biggest shareholder with a stake of just over 18 percent.

 

In the last two years, Elman, 77, has steered Noble to return to its roots as an asset-light trading house. Other top shareholders include sovereign wealth fund China Investment Corp, Orbis Investment Management and Eastspring Investments.


($1 = 1.3870 Singapore dollars)

(Reporting by Sumeet Chatterjee and Anshuman Daga; Additional reporting by Meng Meng; Editing by Muralikumar Anantharaman)