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COFCO kicks off restructuring

By Lilian Liu (China Daily)
Updated: 2007-03-05 09:28

With M&A expert Ning walking into the chairman's office, the giant food trader is expected to take the same road, but faster and farther.

During Ning's career at China Resources Group, he led more than 30 major M&As, which made the group one of China's largest food conglomerates.

Since 1994, Fortune magazine has ranked COFCO among the Global Top 500 Companies.

Although the company's reputation is based on its status as China's largest edible oils and foods manufacturer, importer and exporter, it has been a jack-of-all-trades for decades.

Given its listed arms' strong stock performance, along with the group's dynamic operation strategy, COFCO makes a very good listing candidate, which is bound to attract strong interest from both institutional and retail investors. Its diversified businesses allow the group to profit in various ways, analysts say.

The group has a special aptitude for detecting market needs and immediately jumping into these gaps. As early as the late 1970s, COFCO pioneered production of brewed, delicate cooking oils, slaking mainlanders' thirst for high quality condiments. In 1979, COFCO introduced the world's most popular soft drink Coca-Cola to mainland market, and after that, it brought Le Contre chocolate candy.

In addition to anticipating changes in customers' appetites, COFCO also sensed the onset of the country's tourism boom early on and opened the Beijing Gloria Hotel in 1992.

In 2003, the ambitious food trader extended its business into the insurance sector and set up Aviva-COFCO, a joint venture with British Aviva Group, the world's fifth largest insurance company.

Last month, COFCO and Aviva Group, also the United Kingdom's largest insurance services provider, invested 500 million yuan in their subsidiary group Aviva-Cofco to boost the company's capital strength, solvency capability and insurance capacity.

For a conglomerate such as COFCO, analysts say that listing the entire group on the stock market will secure investors, because any poor performance from non-listed branches might have negative impacts on listed sibling companies, which would otherwise enjoy favorable balance sheets.

However, there are challenges that come with "group listing." Having such a massive group of subsidiaries on such a giant scale would make restructuring very difficult and time-consuming.

Moreover, the process can become even more complicated when Sino-US and Sino-UK joint ventures are involved.

Hong Kong media reported in August of last year that COFCO would sell its 65 percent stake in the COFCO Coca-Cola Beverage Ltd joint venture to Hong Kong-listed COFCO International Ltd a deal that would involve 1 billion yuan in total assets.

COFCO denied the report, but it did not rule out the possibility of such a move.

How, when and what COFCO decides to buy, sell and list in the near future will depend on how the "restructuring wizard" Ning works his magic.

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